| February 2, 2010 View this newsletter as a web page on CFR's website.  |  | | | | | | Top of the Agenda: Deficit Threatens U.S. Power Growing budget deficits in the United States will leave President Barack Obama no room for new domestic initiatives, and the rapid debt growth could erode the country's global influence, the New York Times reports. Obama's proposed remedy would make the problem worse, by increasing deficit spending to lower the unemployment rate in the short term, before the deficits can come down. Part of Obama's challenge is that his political warnings about the consequences of soaring debts are contradicted by market signals. The Treasury has been able to borrow money to finance government deficits at very low rates, indicating that investors still believe they will be paid back. Obama announced plans Monday to crack down (FT) on international tax evasion as a way to help reduce the deficit. His administration estimates the crackdown would raise $122 billion over the next ten years. As part of the plan, U.S.-based multinational companies that transfer brands and patents to foreign affiliates (and pay little tax overseas) would pay a surcharge on the excess returns on those assets. The proposal would also deny companies borrowing money to invest overseas any immediate tax deductions on the interest payments. Republicans say the measures would raise taxes on the very companies that are creating jobs now. Analysis: Economists at the World Economic Forum in Davos, Switzerland, warn (DerSpiegel) that paying down massive public debt will be "very, very painful" for many countries. Deep spending cuts and significant tax hikes may be unavoidable. In the Wall Street Journal, CFR's Amity Shlaes says FDR's war against business helped his popularity but hurt the economy and that Obama should take a more moderate approach. A New York Times editorial says Obama got his priorities right in the 2011 budget and that the recovery is, as Obama estimates, too fragile to immediately make deep cuts in government spending. | | | | | | | | | MIDDLE EAST: Israel Gaza War Report Israel's account of its conduct during the Gaza war, which it submitted in a report last week to the United Nations, was challenged (Guardian) after evidence emerged to contradict a key finding. The Israeli military reprimanded (NYT) two senior officers for firing artillery shells that hit a UN compound during the Gaza war. Iran: On his website, Iranian opposition leader Mir-Hossein Mousavi criticized (al-Jazeera) Tehran's execution of anti-government protesters and pledged to continue opposing the government. | | | | | | | | | | SOUTH AND CENTRAL ASIA: Pakistani Taliban Leadership Void Pakistani analysts say the reported death of the leader of the Pakistani Taliban, Hakimullah Mehsud, would leave the group "effectively decapitated" and weak, the Washington Post reports. Separately, officials say at least twenty-six people have been killed (al-Jazeera) in Karachi, Pakistan's largest city, after four days of ethnic killings. Afghanistan: Afghan President Hamid Karzai is traveling to Saudi Arabia to seek the country's support for his Taliban reconciliation plan. Separately, the United States is accelerating (WSJ) its "kill-capture missions" in Afghanistan, led by small teams of Army commandos, Navy Seals, and Central Intelligence Agency operatives, even as it steps up its goodwill campaign to woo the Afghan people. | | | | | |
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