Goodbye Commerce Department, you won’t be missed

Fifteen years ago, Susan Levine, then Senior Vice President of the Overseas Private Investment Corporation and I, recently having departed my not entirely un-senior post at the Commerce Department, circulated a memo to those who would read it that suggested the elimination of the Commerce Department and the consolidation of many of the important trade negotiating and financing agencies into a single department focused on trade issues. Today, President Barack Obama asked Congress for the authority to make this long-sought, common sense streamlining of the U.S. government a reality.

Obama has had a team, led by Jeffrey Zients, an extremely effective official who before he came to government was an innovative and successful business leader, working on this idea for a very long time now. Zients was methodical, reaching out to literally hundreds of current and former officials, business people, experts and others to understand what works, what doesn't and how things could be organized to better and more efficiently serve the American people. His proposals have been batted around at a senior level in the government, faced natural pressure from those whose turf was being threatened, faced equivalent pressure from those who just don't like change, and throughout it Zients & Co. have persevered. Several times they nearly made an announcement like that was made today. Several times the project seemed dead.

But in the end, the effort advanced to the point of the President's request today because its principle advocate and the one who understood its merits most intuitively from the get-go was not Zients but his boss' boss, President Barack Obama.

The request, which would undo the years of bureaucratic confusion that turned Commerce and much of the economic side of the U.S. government into the hodgepodge it is today, is first and foremost an effort to win from the Congress the power to do what Republicans on the Hill have long called for -- to start to reduce waste and inefficiency in the executive branch of the U.S. government. The broad re-organizational fast-track power sought by Obama is of a type no U.S. president has had since Ronald Reagan. But the request is balanced, allowing Obama to make broad proposals for change but requiring swift Congressional approval for those changes. In short, therefore, it is an area of potential bi-partisan agreement and effective collaboration, a fact that has already been noted in early press coverage of the announcement.

Commerce and the Small Business Administration would be merged into a new entity that would also incorporate the Office of the U.S. Trade Representative, Eximbank, the Overseas Private Investment Corporation, and the Trade Development Agency. Parts of Commerce that never belonged there in the first place, like NOAA, would move elsewhere -- with NOAA heading over to Interior where it has always belonged.

Not only does the move make logical sense -- bringing together all those agencies of the government that support the development of U.S. trade and the job creation associated with it -- but it also would save, according to initial White House estimates, over 1000 jobs and $3 billion over the next ten years.  

I note that in one of the early stories on the announcement, former Clinton White House Chief of Staff John Podesta, was quoted as saying that the plan will support U.S. competitiveness. This resonates with me both because he is right and because when we wrote that memo 15 years ago, it was Podesta who, despite the hue and cry from self-interested senior officials who wanted to preserve their fiefdoms, took it seriously and considered it. He, Jim Harmon, the then head of Eximbank, and just a couple of others were open to really considering the long-term benefits such a reorganization would bring.

Periodically during the intervening decade and a half, I would talk to a reporter who was doing a story on the bowl-of-spaghetti like organizational chart of the international economic side of the U.S. government and would hear of another cluster of folks who were supporting some similarly sensible slimming down of a confusing, bloated, bureaucracy. But those groundswells would recede and the issue would go back into hibernation.

Of course, things are very different now and the time is suddenly right to make such a move. The U.S. needs to tighten its belt. This kind of modest reform is, as some Republicans have already noted, just a first step. Much more can and should be done. But this is a logical, painless first step that is highly unlikely to be objected to by any major constituency being served by the agencies in questions -- because in all likelihood, even with the cuts, the efficiency and enhanced coordination that would result from the consolidation would likely actually lead to much better service for U.S. companies, consumers and others with a stake in our ability to tap into the global economy.

As the President accurately said referring to the multiple agencies he intended to fold together, "In this case, six isn't better than one."

Another reason the timing works for this is that substantial constituencies in both parties should and will actively support the move. Finally, the President has gained special credibility in this area due to the remarkable, if under-appreciated, success of his export initiative. Once dismissed as mere window dressing, the President's push to double exports over five years has seen a string of big successes: two years of export growth averaging over 16 percent thus keeping the U.S. on track for his goal, record lending by a much more aggressive and creative team at the U.S. Eximbank led by Fred Hochberg, the approval of three long-delayed trade deals, enhanced trade enforcement, and most importantly, exports contributing in a major way to wealth and job creation nationwide.

From its absurdly muddled mission statement to the sad little aquarium in its basement (which resembles nothing so much as a slightly expanded version of the kind of fish tank you would find in a downscale Italian restaurant in Plainfield, New Jersey), the Commerce Department is the Frankenstein monster of the federal bureaucracy. It's all bits and pieces that belong in other places that have been sewed together by seemingly distracted or perhaps slightly inebriated Congressional committees. Meanwhile, U.S. trade is increasingly vital to our future and U.S. workers, consumers and exporters all deserve better support -- and we could all do with eliminating wasteful spending. As a consequence, the President's move is welcome on its merits and as an excellent initial step toward more sweeping reforms.

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David Rothkopf

There's no such thing as free enterprise

My younger daughter was in Edinburgh earlier this week and visited the grave of Adam Smith. That's a little weird, right? For a 20-year-old?

Anyway, I learned more from this experience than just that my daughter is a little weird, which, to be honest, I already knew. I also learned that Adam Smith is still dead -- which wouldn't be noteworthy except that here in the United States we seem to be on the verge of having a national referendum on the future of capitalism.

The Republican's presumptive nominee, Mitt Romney, last night offered a victory speech following the New Hampshire primary in which he essentially made the differences in his views on capitalism and those of the president the dividing-line issue in the upcoming presidential campaign. Romney asserted that President Obama seeks "to put free enterprise on trial."

On Sunday, President Obama's chief campaign guru, David Axelrod, said that Mitt Romney was a "corporate raider, not a job creator." In so doing, he helped sketch out the different approaches to this central issue. Romney will try to position himself as a "turnaround artist" who understands what makes American business great and can restore vitality. Obama will try to position the former Bain Capital boss as representative of the greedy, indulgent 1 percent who blew up the economy in 2008 and will do so again if unchecked by wise government.

The intensity of this debate has been heightened recently by the attacks of some of Romney's Republican competitors like Newt Gingrich and Rick Perry who, reeking of sour grapes, are going after Romney as being a representative of "bad" capitalism, the rapacious kind practiced by private-equity bandits, or "vultures" as Perry characterized them. There are manifold ironies and hypocrisies here, given that both are members of the U.S. political party most closely associated with big business views and that, for example, Gingrich's anti-Romney onslaught is being funded by a fat cat named Sheldon Adelson who made his millions in the gaming business. So Gingrich is attacking Romney for playing in the Wall Street casino with dollars made from actual casinos and attacking Romney for hurting workers by seeking profits that were too big (that actually often went to fund the pensions of average Americans), with dollars that came from praying on those poor suckers whose understanding of arithmetic was so lousy that they actually thought they could profit from gambling.

Debating the future of American capitalism is a good idea. The past several years have clearly shown the system is broken. Inequality is skyrocketing. Social mobility is plummeting. Median incomes have been hammered. Too-big-to-fail financial institutions have gotten a free ride while Main Street Americans continue to drown in underwater mortgages. Whether or not we should have bailed those banks out or whether we should have helped the auto industry or how much regulation is the right amount or whether we should have an active industrial policy to support key U.S. industries are all legitimate questions to debate. The fact is that while we once were the example for capitalists the world over to follow, there are now a variety of brands of capitalism emerging that use different formulas and are gaining legitimacy due to their own successes and/or the obvious defects in the "leave it to the markets" approach of Anglo-U.S. capitalism. There is the more state-centric "capitalism with Chinese characteristics" being practiced in the world's fastest-growing major economy. There is the "democratic development capitalism" of Brazil or India. There is the "small-state entrepreneurial capitalism" of countries like Singapore, the UAE, Israel, or Chile. And there is Eurocapitalism which, despite the problems in Europe that are so frequently (far too frequently) cited by Romney, has produced some of the nations (mostly in Northern Europe) that have the best balance between fiscal responsibility, growth, and quality-of-life measures anywhere in the world.

We've gone from celebrating the end of history in which America's free market theology triumphed over godless communism to realizing that our victory dance was premature and that we've entered a new world of competing capitalisms. Further, given our problems, others are gaining sway as the world votes for alternative models with the policies they adopt. It's also worth noting that all the other alternatives gaining traction worldwide have a much bigger role for government in their public-private sector mix than does the U.S. model -- Republican attacks on "big government" aside.

This being a U.S. election cycle, however, rest assured both sides will overstate their cases. Romney will offer a message about free enterprise that will resonate with many and win him the broad support of the business community. But he will make the usual case that government ought to roll back regulations and taxes to the point that those left behind by markets are uncared for, costs associated with abuses pile up, and the biggest and most powerful gain influence at the expense of everyone else. (Citizens United -- the Supreme Court case that equated spending money on campaigns with protected free speech -- is perhaps the greatest domestic threat to democracy since the Civil War. It says those with the most money have the most say in American democracy. It reveals the essential flaw with the "less government is more" argument -- the absence of government creates a void that is seldom filled by the liberty of average Americans but is rather occupied, if you will, by Wall Street and those able to write the biggest checks.) There's no such thing as truly "free" enterprise -- never has been, never should be. There have always been regulations and laws that ensure that businesses serve society and not the other way around -- as it sometimes has felt here in the United States during the past several years.

Meanwhile, Obama & Co. will likely go after business too hard, forgetting the axiom of my former boss, the best Commerce Secretary America ever had -- indeed, one of the few relevant ones -- Ron Brown. Ron regularly observed, "You can't be for jobs and against the people who create them." The American people believe in the fundamental merits of our system. What they want is fairness and balance and genuine opportunity, all things that overpandering to moneyed interests in Washington have undercut in recent years.

Nonetheless, inevitable overstatements aside, it's a good debate to have at this point in U.S. history -- an essential one. I don't just say this because I have a book coming out on the subject in a month (Power, Inc. from Farrar, Straus & Giroux; order your advance copy now online), though that's a good capitalist reason to think so. Rather I say it because how our views on capitalism evolve and how our system is adapted to evolve along with them will determine not just whether the United States succeeds in the decades ahead but who in the United States succeeds and how. It will also go a long way in determining how influential we are in a world of alternative models that are gaining adherents all the time, often for very good reasons.

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