In his State of the Union address, President Obama executed his well-advertised double pivot toward job generation and fiscal restraint. Almost lost in the pundits' babble was the release of a CBO report, “The Budget and Economic Outlook: Fiscal Years 2010 to 2020,” coupled with CBO director Doug Elmendorf’s testimony to the House and Senate budget committees. CBO’s analysis makes it clear just how daunting the employment and fiscal challenges are over the next decade . . . and how perilous the political terrain will be for the Democratic Party.

Let’s start with jobs. For a variety of structural reasons, despite the severity of the recession, CBO predicts a slower-than-average recovery, with fourth-quarter to fourth-quarter GDP growth of only 2.1 percent in 2010 and 2.4 percent in 2011. This means that unemployment this November is likely to be about where it is right now—namely, 10 percent. At the end of 2011, it will stand at 9.1 percent. As growth accelerates in 2012, unemployment will decline more quickly, but it will still be high by historical standards—between 7.5 and 8 percent—on the eve of the next presidential election. Assuming no new recession, we won’t return to full employment until 2016.

“The problems we inherited were far worse than most inside and out of government had expected; the recession was deeper that most inside and out of government had predicted. Curing these problems has taken more time and a higher toll than any of us wanted. Unemployment is far too high. Projected federal spending—if government refuses to tighten its own belt—will also be far too high and could weaken and shorten the economic recovery now underway.

“We’re witnessing an upsurge of productivity and impressive evidence that American industry will once again become competitive in markets at home and abroad, ensuring more jobs and better incomes for the nation’s work force. But our confidence must also be tempered by realism and patience. Quick fixes and artificial stimulants repeatedly applied over decades are what brought us the ... disorders that we’ve now paid such a heavy price to cure.

“The permanent recovery in employment, production, and investment we seek won’t come in a sharp, short spurt. It’ll build carefully and steadily in the months and years ahead. In the meantime, the challenge of government is to identify the things that we can do now to ease the massive economic transition for the American people.”

In the wake of Massachusetts, President Obama faces two urgent decisions. One concerns his agenda for 2010 and beyond. I offered my advice on this last week, have not changed my mind, and won’t repeat myself.

The president must also decide how to proceed with health care legislation. Here I find myself in a paradoxical position. In this publication and elsewhere, I have argued since October of 2008 against beginning the new administration with an ambitious agenda that included comprehensive health reform. Nonetheless, I believe that the president and congressional Democrats would be ill-advised to shelve the effort at this point. Here are my reasons.

First: At the most basic political level, turning tail and running for the tall grass is bound to fail. Democrats who have already voted for health reform (and that’s most of them) can’t take their votes back. Whatever they do between now and November, they’ll be called on to defend what they’ve done. Are they going to say that they’ve changed their minds? Who would believe them?

Second: The American people won’t support representatives they don’t respect. The people respect sincerity, consistency, and strength of purpose. It is often the case that constituents will respect positions with which they disagree—if they think their representatives really mean it. One thing is clear: They won’t respect vacillation and weakness. Does anyone?

Third: The president and congressional Democrats have spent the past year arguing that health reform is in the national interest—that it will broaden coverage, begin to contain costs, increase disposable income, and help improve the government’s long-term fiscal outlook. Which of those arguments ceased to be true between Monday and today?

Fourth: The Founders designed a representative republic, not a plebiscitary democracy. Officials are elected to make judgments on behalf of the people, and the people get to judge those judgments. Large changes are always more uncertain than is the status quo, which is why change is so hard. At some point, elected officials have to tell their constituents, “I’ve done my best to think this issue through, and this is the conclusion I’ve reached. Now it’s your turn.”

There are two cogent arguments against the position I’m defending. The first is that there’s not nearly enough trust in government to sustain comprehensive health reform, and ramming it through in the face of public disapproval will only intensify mistrust and make matters worse. The shortage of trust was a compelling reason not to go down this road in the first place--especially in the context of necessary but expensive and unpopular measures needed to ward off a second Great Depression--but it doesn’t resolve the question of what to do now. It’s a judgment call: Are you more likely to begin rebuilding trust by sticking to your guns--or by in effect saying that you weren’t really that serious about the most important piece of social legislation in decades?

The second counterargument is that elected officials have involved the people in a year-long discussion about health reform, and the people have rendered their judgment, first in public opinion surveys, then in Massachusetts. Proceeding in the face of this judgment, the argument goes, is a gross violation of small-d democratic norms. This brings us back to the issue of the nature of our political system and the principles of conduct it embodies. One might argue that by the fall of 2006, the American people had rendered a negative judgment on the Iraq war and that George W. Bush’s decision to double down with the troop surge was undemocratic. Well, speaking as someone who publicly opposed that war well before we entered it, I have to say that I respect President Bush for making the decision he did ... and that it was probably right on the merits. Yes, it’s one thing to be the chief executive, another to be a member of the House. But that difference doesn’t mean that it’s always wrong, or undemocratic, for Congress to exercise independent judgment.

So what is to be done? President Obama’s opening post-Massachusetts gambit--his interview with George Stephanopoulos--was not helpful. Consider the following statement: “I would advise that we try to move quickly to coalesce around those elements of the package that people agree on.” Which people? If he means the American people as a whole, I’m not sure what that proposal amounts to. Sure, everyone would like restraints on insurance companies and constraints on costs increases (the two areas the president cited), but you can’t get them without other things that many people don’t like, such as costly coverage expansion and increased regulatory bureaucracy. If he means Democrats and Republicans in Congress, the zone of agreement is near zero and likely to remain there until November. Given the success of their obstructionism so far, why would Republican leaders change course? And after the failed negotiations in the Senate Finance Committee last year, who believes that Republican moderates would break ranks now? As for focusing on areas of agreement between House and Senate Democrats, I thought that’s what the discussion up until Monday was all about.

If the president sounds such an uncertain trumpet, who will follow? If he still wants legislation, he should invest the full authority of his office to persuade the House to endorse the Senate bill, accompanied by a package of amendments to be considered separately under the reconciliation process.  If he has concluded that he has no choice but to take the issue off the table, he should say so. If he continues to utter hopeful banalities devoid of concrete meaning, the fragile reform coalition will collapse within days, with consequences that will endure for decades.

In his forthcoming State of the Union address, President Obama has an opportunity to reset his administration and regain the initiative. What follows is the domestic policy portion of a speech he could give if he decides to do that. The alternative is some version of steady-as-you-go. This would reflect a judgment on his part that he’s doing just fine, or at least well enough—the B+ he awarded himself a few weeks ago. Unfortunately for him and for his party, this is a judgment with which an increasing share of the electorate disagrees.

My fellow Americans,

In a ritual hallowed by tradition, I come before you tonight to discuss the state of our union. I wish the news were better. You know as well as I do that the condition of our economy is not good; that millions of Americans are out of work, underemployed, or too discouraged even to look for jobs; that the course of the war in Afghanistan forced me to commit more of our sons and daughters to battle; and that international terrorism continues to threaten our lives and our way of life.

In normal times, I would discuss—as is customary—the full range of issues for which I am responsible. These are not normal times. Accordingly, I will focus my speech—and my presidency—on the two paramount challenges we confront: rebuilding our economy and enhancing our national security.

When I took office, our country was facing a global financial crisis. During the first year of my administration, I did everything I could to avert a rerun of the Great Depression. I know that many of these steps—from bailing out the banks and auto companies to enacting the economic stimulus—were not and are not popular. I understand your frustration that you have not yet seen improvements in jobs, wages, and prospects for small business—and that many of those responsible for the disaster have not been held responsible. I took these steps, not because I thought they would make my ratings rise, but because I was convinced that they were unavoidable and in the national interest.

Similarly, I addressed health reform, not from an abstract desire to do good, but because our dysfunctional health care system was dragging down the private sector, gobbling up wages, and destabilizing public budgets. I know that the legislative process was not pretty and that, understandably, many of you mistrust its results. Nonetheless, my duty to promote the general welfare left me no choice, and I am confident that when you experience the reformed system for yourselves, you will decide that it was worth it.

But the issue before us right now is no longer economic rescue; it is economic growth—the right kind of growth—growth that produces jobs, rising wages, and opportunities for advancement. That will be my administration’s principal domestic focus—for the coming year, and for as long as it takes until every American who wants work can find a job with a future.

During the coming year, that goal means, first, that we must assist states and localities so that they are not forced to fire hundreds of thousands of workers; second, that we must offer the private sector effective incentives to hire new workers; and third, that we must create a national infrastructure bank that will mobilize public and private resources to rebuild our crumbling roads, bridges, and ports . . . and boost investment in the environment and information technology as well.

As we work to raise employment this year, we must look down the road as well. While some deficit spending was necessary to avert catastrophe and remains necessary to jumpstart the economy, we cannot hope to sustain growth in the private sector if the federal government is running trillion dollar deficits as far as the eye can see. To make sure that doesn’t happen, I am announcing my support tonight for a bipartisan fiscal commission that would report its recommendations next December for a mandatory up-or-down vote in Congress early next year.

Fundamental tax reform is a key element of long-term economic health. Our current tax code is outdated in just about every way. Last year, I asked one of our country’s most respected economic leaders—Paul Volcker, the former chairman of the Federal Reserve Board—to lead a bipartisan task force on tax reform. I hope that the Congress will act favorably on its recommendations this year. And if not, I would ask the bipartisan fiscal commission to consider them for inclusion in its report.

Finally, we must make sure that our nation’s largest financial institutions use their power and privilege to help build our country, not to line their own pockets. Congress must overhaul our system of financial regulation—this year—to make sure that what happened in 2007 and 2008 never happens again. And let me be clear: These institutions owe their profitably—and their very existence—to the steps we took that put your taxpayer dollars at risk. If they choose to ignore their responsibilities to you and once again award themselves huge bonuses, I will work with the Congress to ensure that they change course. If they’re not willing to invest their profits in our country’s future, I’ll work to redirect these resources to institutions that are working, not just for themselves, but for you. Holy Scripture and common sense are at one: Greed is not good.

It is said, rightly, that to govern is to choose. I have chosen to focus my domestic agenda on the economy and jobs. Let me be frank with you: that means that many important matters must be postponed until our economy accelerates. I believe in cap-and-trade legislation to reduce the pace of climate change. I believe in a fundamental reform of our immigration laws. There will be a time for both. This year is not that time, because nothing must divert your elected representatives from acting on the measures our economy needs.

When Franklin Roosevelt delivered his first inaugural address to a nation mired in depression, he reminded us that “our common difficulties ... concern, thank God, only material things.” The same is true today. The current recession has not erased our history or undermined our spirit. Our capacity for innovation is unmatched. Our willingness to adjust, to reinvent ourselves, is as strong as ever. You need—and you deserve—policies that empower your strength, and leaders as committed to the future as you have always been. That is what I am offering tonight—not the path of least resistance and business as usual, but one that confronts our problems and rebuilds our country.

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A just-released Gallup survey illuminates the dynamics of party competition and underscores the increasing polarization of American politics. As Gallup previously reported, conservatives (40 percent of the total) have surged ahead of moderates (36 percent) to become the largest ideological group in the electorate; Republicans are far more conservative (71 percent) than Democrats are liberal (38 percent); and Republicans are much more homogeneous than Democrats. What the new survey adds is a picture of persistent change over time. Since 2000, the conservative share of the Republican Party has grown by 9 percent, as has the liberal share among Democrats. During the same period, the moderate share has declined by 7 points among Republicans and 8 points among Democrats.

The parties, in short, are significantly more polarized than they were when Al Gore and George W. Bush squared off. This doesn’t mean that inter-party cooperation is impossible, but it is noticeably more difficult than it was a decade ago, which was hardly a Golden Age of bipartisanship.

The other noteworthy development is the increased conservatism of independents. After eight years of stability, the share of conservatives among independents surged by 5 points during the past year, while the numbers of moderates and liberals both dropped. It is not clear whether this represents an ideological shift among long-time independents, the increasing inclination of populist conservatives to call themselves independents rather than Republicans, or some of both trends. But one thing is clear: Because shifts among independents contributed significantly to the Democrats’ midterm victory in 2006, this recent trend is one more indication--as if another were needed--that they will face a much stiffer challenge this year.

I sit in one of the dives
On Fifty-second Street
Uncertain and afraid
As the clever hopes expire
Of a low dishonest decade

--W. H. Auden, “September 1, 1939”

It’s official: For the United States, the Naughts were a lost decade--zero job creation, declining household net worth, and the slowest GDP growth (by far) since the 1930s. And yet, Americans remain remarkably optimistic. In a just-released Gallup poll, 63 percent think the next 20 years will be good ones for the country—down from higher levels in 1990 and 2000, to be sure, but noticeably higher than the 51 percent recorded in 1980.

The question is whether our politics can redeem these hopes. We have survived, barely, a decade of evasion. What we need now is a decade of truth: politicians with the courage to utter it, and citizens with the fortitude to accept it. Let me offer a couple of suggestions.

 During the next decade, we must save more, invest more, produce more, and export more. That sounds anodyne, but it isn’t, because it implies that personal consumption will have to grow more slowly than the GDP. And because personal consumption includes health care, which will continue to grow faster than GDP, other areas of consumption, such as home furnishing and restaurant-going, may have to flatten or even decline—an abrupt shift from 1995-2007, when consumption soared in nearly every category.

During the next decade, we better not borrow a trillion dollars a year, year after year, much of it from the rest of the world. I say “better not,” because at some point foreign lenders will come to doubt our long-term solvency and demand a higher risk premium, with devastating effects on U.S. interest rates and economic growth. There’s no way we can regain our balance with restraint in discretionary spending alone; everything will have to be on the table.

In our polarized political circumstances, what congressional experts call “regular order” offers negligible prospects for progress on this front. Many elected officials have concluded that an empowered fiscal commission along the lines of the one proposed by Kent Conrad and Judd Gregg is the only strategy with any hope of succeeding. (Their bill already has 35 cosponsors, well-balanced between the political parties; the parallel House bill has more than one hundred. 

This sets up an early test for President Obama. If he endorses an empowered commission as part of a substantial increase in the debt ceiling (or in his FY2011 budget), he will signal his commitment to fiscal truth. If he constitutes a toothless advisory commission through executive order, he will signal just the opposite—and fool no one.

Serious analysts ponder the possibility of a Japan-style decade of stagnation; others fear an irreversible power-shift to China. But national decline, if it comes, will be our choice, not our fate. The next decade will test our capacity to govern ourselves, to exercise some much needed restraint in the face of dire economic circumstances. As George Bernard Shaw once remarked, “Democracy is a device that insures we shall be governed no better than we deserve.”

When the history of the Obama administration is written, this week may well be regarded as the moment when Democrats’ anxieties crystallized into genuine alarm. Factional fights within the party exploded into public view. Howard Dean—regarded by many progressives as a leader on health reform—denounced the Senate bill, declaring that it “would do more harm than good to the future of America.” Speaker of the House Nancy Pelosi made it clear that the Obama administration would be left on its own to make the case for its Afghanistan policy; odds are that a large number of House Democrats—perhaps even a majority—will oppose funding it. Thirty-eight House Democrats, many facing tough races, joined forces with the Republicans to turn the vote on a new jobs bill into a cliff-hanger that forced the Speaker to spend an hour on the House floor personally lobbying wavering members. Even E. J. Dionne Jr., an ardent liberal and congenital optimist, worried publicly that while “[a]n increasingly bitter and negative Republican Party may not be able to win the midterm elections … Democrats definitely can lose them.” The reason: Democrats’ “turmoil and backstabbing are making what is a rather good [health care] plan look like a failure while persuading political independents that they are a feuding gang rather than a governing party.”

Two highly respected surveys underscored the gravity of the situation. The NBC/Wall Street Journal found that only 33 percent of respondents think that the country is headed in the right direction, down ten points from April. President Obama’s job approval is down to 47 percent, the lowest of his presidency, and only 39 percent are confident that he has “the right set of goals and policies to be president of the United States.” Only 32 percent think that Obama’s health care plan is a good idea, compared with 47 percent who think it’s a bad idea.

Congressional Democrats fared even worse. 34 percent of respondents regard this year’s Congress as “one of the worst,” up eleven points since July. Only 35 percent report positive feelings about the Democratic Party (down from 49 percent in February), while 45 percent are negative. When people are asked about their preferences for party control of the next Congress, Democrats and Republicans end up in a statistical tie. When they are asked how they would feel about a congressional candidate “who has supported Speaker Nancy Pelosi’s issue positions over ninety percent of the time,” 20 percent said this fact would make them more likely to support the candidate, while 52 percent said less likely. (The attack ads just about write themselves.)

The Pew survey underscored other troubling trends. Only 53 percent say that Obama has a “new approach” to politics, down from 66 percent in February, while 37 percent characterize his approach as “business as usual,” up from 25 percent. Forty-five percent see him as tackling too many issues, up from 34 percent in April. Sixty-three percent of independents say that Obama has kept “only a few” or “almost none” of his campaign promises. The survey notes “unabated economic gloom,” with 91 percent rating conditions as only fair or poor. And while Democrats continue to approve of the Democratic congressional leaders, support for them among independents has declined by seven points since June. (Democrat’s only consolation is that Republican leaders receive even lower ratings.)

The ten and one-half months between now and the midterm elections are an eternity in politics … and not long at all. If Democrats are to turn things around, they must quickly agree on their best strategy, and then execute it relentlessly. Here are my suggestions.

• Get health care done as quickly as possible. The House should recognize that any Senate bill that can garner 60 votes is likely the only bill that can do so. Logic suggests that the best course would simply be for the House to pass the Senate bill, avoiding a useless and time wasting conference.

• Pivot hard toward the economy and jobs, and keep the focus there throughout 2010. That means keeping divisive issues—such as immigration and cap-and-trade—off next year’s legislative agenda. It also means more action—such as expanding the flow of credit to small business—to promote job creation in the private sector.

• Acknowledge that public concern about spending, deficits, and debt is high and rising. That doesn’t mean turning toward fiscal restraint next year, while the economy remains fragile. It does mean endorsing the creation of a bipartisan fiscal commission—along the lines of the Base Realignment and Closure Commission—with the power to make recommendations after the mid-term elections to which Congress would be required to respond early in 2011.

Beyond these specifics, Democrats will have to shift their mindset and recalibrate the balance between stability and change. It turns out that the “change” average Americans most wanted in 2008 was getting rid of the Bush-Cheney administration. (The NBC/WSJ poll shows that they remain the two least respected public officials of the past decade.)  A year later, most Americans are feeling anxious and beleaguered, and much of what’s coming out of Washington is just making things worse. They want their government to be a rock of security in uncertain times, but it seems to them instead to be exacerbating insecurity. They want reassurance, jobs, and temporary assistance until they can find them, not a new New Deal. They will accept sensible change in measured increments, but not pell-mell and all at once.

Yes, this means slowing down and doing less for a while. But as every poker player knows, going all in and then overplaying your hand is a good way to go broke in a hurry.

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At Oslo, in circumstances verging on a speechwriter’s nightmare, Barack Obama gave by far the best address of his presidency. A thoughtful meditation on war, peace, and human nature, the speech also represents a promising reorientation of his administration’s foreign policy. The question now is whether he will adjust his policies to match his words.

What struck me most favorably about the speech was Obama’s moral realism--about the world, and about his own role within it. Forcefully, but with dignity and restraint, he distinguished his responsibilities from those of King and Gandhi, who led nonviolently as private citizens. “Evil does exist in the world,” he declared, and as long as it does, war is a moral possibility, sometimes a moral necessity. And not only to defeat evil; “the instruments of war,” he said, “do have a role to play in preserving the peace.”

The president spoke out unapologetically in defense of America’s role as a peacemaker and peacekeeper: “The world must remember that it was not simply international institutions--not just treaties and declarations--that brought stability to a post-World War II world. Whatever mistakes we have made, the plain fact is this: the United States of America has helped underwrite global security for more than six decades with the blood of our citizens and the strength of our arms.”

Obama directly confronted global public skepticism--about America’s role and about war itself. “I understand why war is not popular,” he said. “But I also know this: the belief that peace is desirable is rarely enough to achieve it. Peace requires responsibility. Peace entails sacrifice.”

He went on to describe the kind of peace America seeks: “Peace is not merely the absence of visible conflict. Only a just peace based upon the inherent rights and dignity of every individual can truly be lasting. It was this insight that drove drafters of the Universal Declaration of Human Rights after the Second World War. In the wake of devastation, they recognized that if human rights are not protected, peace is a hollow promise.”

But all too often, Obama continued, their principles are ignored. In some countries, leaders falsely suggest that human rights are merely aspects of the West, foreign to and imposed on non-Western cultures. In America, realists and idealists contend endlessly against one another.

“I reject this choice,” the president declared. “I believe that peace is unstable where citizens are denied the right to speak freely or worship as they please, choose their own leaders, or assemble without fear. Pent up grievances fester, and the suppression of tribal and religious identity can lead to violence. We also know that the opposite is true: only when Europe became free did it finally find peace.” These truths have practical implications for the conduct of American foreign policy. “Even as we respect the unique culture and traditions of different countries,” Obama promised, “America will be a voice for those aspirations that are universal.”

The question is how best to do this. The president defended his policy of engaging repressive regimes, which he characterized as painstaking diplomacy. But up to now, I believe (and I am far from alone) that his administration has been at best timid and laggard in giving voice to the aspirations of suppressed peoples struggling for the political rights he defends as fundamental. If his Oslo speech is the harbinger of a new and better balance between private engagement and public firmness, and between carrots and sticks, the future of his foreign policy looks bright.

Timing is to politics what location is to real estate. Good policy ideas are useless if the time is not right. In a democracy, leaders must focus—and be seen to focus—on the problems the public cares about the most. If the political agenda is not aligned with the public agenda, the likely result is frustration and anger. Conversely, if leaders work hard on the public’s problems, the public response is likely to be favorable, even if the results are not immediate. 

To state the obvious, the number one issue on the public’s mind is the sorry condition of the employment market, and the people want action to restart the great American jobs machine. In a speech delivered at Brookings this morning, President Obama went beyond the stimulus package to propose new job-creating measures, including help for small business as well as additional investment in infrastructure and weatherization (AKA “cash for caulkers”). He also endorsed the continuation of safety-net policies such as unemployment insurance, COBRA, and aid for hard-pressed states and localities. To pay for at least some of these measures, he recommended drawing on a portion of the unspent or repaid TARP funds, a program he described as unloved but necessary and proposed to “wind down.”

We can quibble about the details. For example, it’s not clear why the president once again passed up an opportunity to resuscitate his campaign proposal for a National Infrastructure Bank, which could help mobilize far more capital than either TARP or the normal appropriations process. But the larger point is that the president is beginning to realign his agenda.

But he’s just beginning. To complete the pivot and make 2010 the year of jobs, two other things must happen. First, the White House must fully integrate the jobs focus into the president’s schedule. Some equivalent of the Allentown visit should occur at least weekly, and it wouldn’t hurt to see the president in a hard hat, cheering on projects that wouldn’t have gotten started without government action.

Second, the legislative agenda for 2010 must reflect and reinforce the renewed focus on job creation. That means postponing items that the American people are bound to regard as diversionary as long as unemployment remains high. While action on items such as climate change and immigration is worthy in principle, the time is not right. If the president and congressional leaders try to force the pace, they are likely to fail—and pay a heavy political price in November.

Great presidents from Lincoln to FDR have understood that “now or never” is the ultimate false choice in politics. All too often, now means never. The “fierce urgency of now” should be reserved for what is truly urgent. As for the rest, patience is more than a virtue; it is a necessity.

The wall between The Wall Street Journal’s news division and its editorial page makes for a lot of good reporting and a fair amount of cognitive dissonance as well. For example, the November 24 edition featured an article, tucked away on A14, about Israel’s response to the economic crisis. In it we learn that the Netanyahu government raised taxes, avoided traditional stimulus measures, and ruled out government bailouts for banks and bondholders. In short, the government rejected supply-side economics, Keynesian economics, and “too big to fail” economics—a trifecta of heresies against the competing orthodoxies that dominate the U.S. landscape. The result: a rebound that Barclays analysts call “the strongest recovery story” in Europe and the Middle East.

Undergirding this heterodox strategy is a principle that I’ll call “sound diet” economics—namely, eat your spinach before dessert. As Israeli finance minister Yuval Steinitz puts it, “We wanted to create expectations and send the message that although now it’s difficult, later it will be better. We expect to come out of the crisis with an advantage over the rest of the Western world.”

The Israeli government’s approach was hardly laissez-faire, however. Rather than consumer-oriented pump-priming, it poured funds into large, fast-track infrastructure projects and private sector R&D programs. The country will come out of the downturn with value added to both its public goods and its high-tech economy. No wonder Steinitz is so confident.

This mindset helps explain why the Journal (also on November 24) was able to run a review of Dan Senor and Saul Singer’s Start-Up Nation, a book-length paean to the Israeli economy. Israel, says the review, is the world’s “techno-nation,” with a share of GDP devoted to R&D 50 percent bigger than that of the U.S., and venture-capital investment per capita at 2.5 times our rate.

So while Israel, besieged throughout its existence, builds its future, the United States, with every advantage in the world, devours its seed-corn. What’s happening to us is not just a concatenation of policy problems; it’s a test of our moral fiber and our capacity to govern ourselves. Does our government have the guts to feed us some spinach before dessert? Will the administration endorse a bipartisan budget commission with real teeth, along the lines Senator Kent Conrad advocates? Will it invest political capital to move a National Infrastructure Bank through the Congress? While the signs so far are not encouraging, it’s not too late to change course. If we lose our future, we’ll have no one but ourselves to blame. 

As anyone who has used a passport recently knows, infrastructure in the United States has fallen well below world standards. Decades of underinvestment have taken their toll, fiscally hard-pressed states are cutting back, and the current system of federal appropriations for infrastructure projects precludes a coordinated approach that matches the scale of the problem and reflects national priorities.

There’s a solution, which Barack Obama advocated during his presidential campaign: a National Infrastructure Bank. A bipartisan commission co-chaired by Felix Rohatyn and former Senator Warren Rudman developed the proposal a few years ago, and bills to establish such a bank have been introduced in both the House and the Senate.

While the details vary, the general idea is this: The bank would be established with an initial infusion of federal capital--$60 billion is a frequently cited figure--and an independent board of directors. All projects seeking federal support over a fixed amount ($75 million in the 2007 Dodd/Hagel version) would have to be submitted to the bank for approval. The governors would employ an explicit and rigorous template for evaluating projects’ benefits and fundability. Projects surviving this test would be eligible for a range of financing options.

Beyond reducing the influence of local pork-barrel considerations on infrastructure investments, the bank would offer two other advantages. First, it could mobilize additional capital by reselling the loans it makes in the private market. This would enable the bank to make more loans without additional appropriations, multiplying the bank’s impact on the direction and level of investment. Second, it could help smooth over some short-term political problems. Rather than forcing current taxpayers to bear the entire burden of investments from which the next generation will also benefit, revenue bonds would enable all users over a period of decades to pay a fair and affordable share.

We have an urgent need--a growing gap in providing public goods that improve economic efficiency as well as the quality of social life. We have massive unused resources, in the form of idle plants and equipment and sky-high unemployment. Infrastructure investment creates high-quality jobs here at home, and it produces tangible results to which politicians can point with pride.

So what’s not to like? Or more precisely, who doesn’t like it? Congressional appropriators, for one, are likely to because a bank with an independent board would clip their wings. And it is rumored that some senior members of Obama’s economic team are opposed as well. It is, however, an idea that Barack Obama has repeatedly endorsed. And it’s a natural centerpiece for any agenda that emerges from the White House’s December “jobs summit.”

So will the president have the courage of his campaign convictions? Will his advisors suspend their disbelief? Will we become once again the country that created the interstate highway system? Or are we too divided and dispirited even to try? Stay tuned.

Rahm Emanuel to The New York Times, 11/10/2009: "Let's be honest. The goal isn’t to see whether I can pass this [health care reform] through the executive board of the Brookings Institution. I’m passing it through the United States Congress with people who represent constituents.”

Dear Rahm,

It may surprise you to learn that many of us here at Brookings like politics as much as you do, and some of us even know something about it. But we don’t understand it exactly the way you do.

Yes, politics is the art of the possible. But leadership is the art of expanding the possible. Leadership without politics is futile. But politics without leadership is blind. 

If you define “success” as a bill—any bill—you (and by implication, the man you serve) are telling your former colleagues in Congress that they are free to do whatever suits their short-term political convenience. This all but guarantees that their work product will duck the hard issues. In the case of health care, it means that they won’t embrace real, guaranteed, and substantial long-term cost reductions throughout the entire system, private as well as public, without which universal coverage will quickly become unsustainable.

It’s time for the White House to step in and speak out. That means publicly specifying the essential elements of meaningful health care cost containment. And it means insisting that they are included both in the Senate bill and in the conference report. I think you know what they are. If not, call Peter Orszag.

Sincerely,

William A. Galston, Senior Fellow

The infamous den of useless utopian thinking known as the Brookings Institution

UPDATE: Since Rahm also took a dig at the Aspen Institute in that Times article (“I’m sure there are a lot of people sitting in the shade at the Aspen Institute—my brother being one of them—who will tell you what the ideal plan is. Great, fascinating. You have the art of the possible measured against the ideal.”), TNR asked Walter Isaacson, its director, for a comment. Here’s what he had to say: “He's absolutely right. But the dirty little secret about Rahm Emanuel is that he knows and cares about policy substance more than anyone in Washington.”