Bo Cutter

Roosevelt Institute Senior Fellow and Director of the Next American Economy Project

Recent Posts by Bo Cutter

  • Is Bridgegate Politics as Usual, or Beyond the Pale?

    Jan 16, 2014Bo Cutter

    A perspective on the Christie administration's behavior from someone who's seen firsthand how government operates.

    A perspective on the Christie administration's behavior from someone who's seen firsthand how government operates.

    For those who are not familiar with the story -- perhaps that same set of people who in questionnaires do not know where the Mississippi River or the Pacific Ocean is -- Governor Chris Christie's staff created a several-day monstrous traffic jam around the George Washington Bridge last September, apparently to get back at the Democratic mayor of Fort Lee, New Jersey for not supporting the governor for reelection. After denying for months that anything happened, the governor fired everyone he could find, held the world's longest and most lachrymose press conference, denied all knowledge, said he was "very sad," and seemed to conclude that he was the victim here. The poor jerks who sat in traffic for several hours apparently didn't count.

    The best and funniest column on this by far was by Gail Collins in Saturday's New York Times; I can't come close to that, so I'll ask the deep questions.

    1. What are the odds that Governor Christie is telling the truth when he says he knew nothing?

    Zero, or bagel, as they say in the finance business. I suspect he didn't order the dirty deed, but this is exactly the kind of stunt political advisors pull when they're riding high and want to show how tough they are. There would have been lots of smirking around the governor -- remember, at the time they would have been quite proud of it -- and you would have had to be about as unaware as a tree not to notice. The governor is not known for being unaware.

    2. Has there been any kind of pattern that might suggest this sort of behavior was part of the governor's genotype?

    The only way you can say there was no pattern here is if you are a denier of combinatorial probabilities and a lot of introductory math. The Times has specified several incidents which sure look like revenge bullying. If I give the governor a 60 percent probability that each of these events was not part of a pattern (way above my gut feel), there's still a 92 percent chance that this is all part of a pattern. I'm going with a pattern.

    3. Is it surprising that the governor threw everyone on his staff within reach under the bus and denied knowing David Wildstein, a senior staff member and a friend since high school?

    Are you kidding me? This is pure "homo politicus" stuff. Take my word on this: there is essentially no one in big-time American politics who wouldn't gut his or her best friend in an instant for almost any temporary advantage. (The high school friend matter is almost too easy. No one in the known universe who graduated from an American high school believed any single word, including "a," "an," and " the," of this story.)

    4. Is the actual behavior just life in the big leagues or a touch disturbing?

    Certainly this traffic stunt was more inventive than anything I've heard before, and I've been close to this game since 1970. The other acts were nowhere near as clever but seem to be similar to the traffic stunt in two other big ways: they feel out of proportion, and they targeted civilians, not political pros. They imposed large arbitrary penalties on normal professional people who were simply doing their jobs. But I keep coming back to the folks caught in traffic. Let's say 500,000 people were caught in the traffic jams for, say, four additional hours each. That's 2 million traffic jam person-hours. If I value people's time at $20 per hour, that's a $40 million cost, all because someone got angry that a Democratic mayor didn't support a Republican governor who was already winning by a landslide and was simply trying to run up the score. Probably some of the commuters actually lost their jobs because of this.

    So ask yourself, if you're just a citizen, and this guy becomes president with a lot more power and lots more reasons to get angry, how likely are you to be collateral damage in some scheme some other political "advisor" comes up with? I think you have to come down on the "disturbing behavior" side. I know "politics ain't bean bag," as Christie said, and if one pol wants to take a whack at another pol, I couldn't care less. But this crosses a lot of lines.

    So back to the question in the title. There's no way this is normal behavior for normal human beings. Some of it is very normal for "homo politicus," and for athletes and hedge fund billionaires who feel particularly entitled. But the behavior at the core is way beyond the pale. Life is tough enough without leaders dedicated to getting even at your cost for the tiniest slight or the smallest act of dissent.

    Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

    Photo via ThinkStock.

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  • Stanley Fischer is the Right Choice to be the Fed's Vice Chair

    Dec 12, 2013Bo Cutter

    Fischer has the temperament and the experience to help guide the Federal Reserve through the difficult policy debates ahead.

    A brief comment on the possible nomination of Stanley Fischer to be the Vice Chair of the Federal Reserve Board. Full disclosure: I know Professor Fischer well and think extremely highly of him. He has been a leading light of the Aspen Institute's annual seminar on the world economy, which I co-chair.

    In a singe declarative sentence: this would be a wonderful nomination. I don't know why he wants to do this, but we should be so lucky.

    Fischer has the temperament and the experience to help guide the Federal Reserve through the difficult policy debates ahead.

    A brief comment on the possible nomination of Stanley Fischer to be the Vice Chair of the Federal Reserve Board. Full disclosure: I know Professor Fischer well and think extremely highly of him. He has been a leading light of the Aspen Institute's annual seminar on the world economy, which I co-chair.

    In a singe declarative sentence: this would be a wonderful nomination. I don't know why he wants to do this, but we should be so lucky.

    Stan Fischer has vast central banking and international economic policy experience. Remarkably, he just stepped down as Chairman of the Central Bank of Israel (a 10-year stint), he has been the principal deputy at the IMF, and he has long been one of the world's leading macroeconomists. There is no one in this sector Stan Fischer doesn't know and hasn't worked with.

    He understands the requirements and realities of policymaking at this level. I suspect there isn't a policy environment in the world more "rough and tumble" than Israel. This is a background that will become useful in a hurry. The Republicans in the House have announced their intention to do a thorough examination of the Fed. There's no reason any major institution should be immune from being evaluated, but this is to be read as an intention to beat up the Fed as much as possible and collect as much media attention for the home districts as possible. Janet Yellen will find Stan an invaluable resource as all of this happens.

    I've watched Stan for well over 10 years in discussions and debates. He is calm, he listens unusually well, and he rarely regards the person on the other side as the enemy. He actually learns in the course of a debate. The Fed faces tough calls over the next years and it will require that its leadership listen to a wide range of very smart people who passionately hold very different views.

    The only area I can imagine where Stan will be attacked will be his roughly four-year period 10 years ago as a vice-chair of CitiBank. I sure hope that attack doesn't emerge. I think it's a very good thing that one of the world's leading central bankers actually has a working experience-based understanding of large commercial banks.

    Finally, back to Janet Yellen. It says a lot about her - all good - that she would seek a number two as strong as Stan Fischer. You can tell a lot about how capable the person at the top is by seeing if he or she is threatened or energized by having first-rate colleagues. Clearly Janet Yellen is very comfortable with who she is and the kind of leader she wants to be.

    Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

     

     

    Federal Reserve banner image via Shutterstock.com

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  • What Did the Government Shutdown Battle Really Accomplish?

    Oct 21, 2013Bo Cutter

    Republicans have thoroughly discredited themselves and cleared the way for President Obama to put forward a new agenda.

    Well, that was fun. We just escaped another Perils of Pauline moment by deciding not to test the proposition that default doesn't matter, and the Republican Party's (apparently diminishing) instincts for self-preservation finally overcame its fear of its far-right base. So where are we?

    Republicans have thoroughly discredited themselves and cleared the way for President Obama to put forward a new agenda.

    Well, that was fun. We just escaped another Perils of Pauline moment by deciding not to test the proposition that default doesn't matter, and the Republican Party's (apparently diminishing) instincts for self-preservation finally overcame its fear of its far-right base. So where are we?

    First, a brief victory lap. As I predicted a week ago, this debacle was devastating politically for the Republican Party. Reflect on this quote from the most recent Wall Street Journal/NBC poll, taken after about 12 days of the shutdown: "the poll gave the Republican Party its lowest marks in the history of Journal polling. More than twice as many (participants) hold a negative view of the GOP as a positive one. By contrast the number of Americans viewing the Democratic Party positively or negatively was nearly equal at 40%." I won't bore you with more numbers; they all tell the same story.

    This result was inevitable. The Republican House members (1) chose a goal they could never accomplish; (2) chose means (shutting down the government and threatening default to defund ObamaCare) that never had a whiff of political legitimacy; (3) never had a strategy; (4) never communicated a comprehensible story; (5) spent every waking hour making themselves look like mean, inept aliens; and (6) voluntarily selected a negotiating tactic that was beyond stupid. You never, never, never enter into a negotiation with both a goal that is really hard to achieve and a self-defined binary outcome, with no middle ground. All of this against a president who was and is a lot more popular than they are. (Maybe none of them had ever heard the story of the bear and the hikers.)

    As I said before, in the history of the world, no one has ever been luckier than President Obama in terms of who his opposition is. All he had to do was wait for the game to come to him. As Napoleon said, never interfere when the enemy is in the midst of destroying itself.

    And what did all of this accomplish, except a vast waste of time and money, further erosion of trust in politics and democracy, and a substantial hit to America's international reputation? I'm tempted to answer "nothing," but that's not true.

    First, it was diverting and fun, in a way. I particularly liked the repeated instances when people who loudly shut down the government discovered that they didn't like shutting down the government. But you can only stand so much of that fun.

    Second, it pretty much guaranteed we wouldn't be put through this by the Republican House again for a while. Of course, some of them continue threatening, and there will continue to be budget and tax battles, but I cannot imagine anyone actually daring to try for shutdown and default again during President Obama's term. He should have fought this fight two years ago in March 2011, as I wrote then, but learning lessons late is the human condition.

    Third, it accomplished the impossible by switching attention away from the enormous and predictable startup problems of ObamaCare and toward the inanities of the people who foisted this debacle on us. Who knew there were so many Republican politicians more eager to explain at length why default was a destiny to be embraced than to ask why the new heath care exchanges weren't working?

    Fourth, it probably ended any chance Republicans had of winning the Senate, maybe put the House in play (I see 435 campaigns on the general theme of "he (or she) shut the government down; let's shut him (or her) down"), and gave the Democrats a huge boost for 2016. Did Senator Cruz just simultaneously win the Republican 2016 presidential nomination and elect Hillary Clinton?

    Fifth, it made inevitable a necessary civil war within the Republican Party. A party cannot go through a debacle like this without hard questioning about how it reached this point and what it is trying to accomplish. The country actually needs the Republicans to go through this fight.

    And sixth, it provided President Obama with a totally unexpected opportunity to reinvigorate his second term. He's the only political player in Washingyon left standing with any credibility or gravity, and if he now defined a sensible, pragmatic, doable agenda, he could get it done.

    I'll conclude on the agenda. The Republican Party doesn't have one, and I see little evidence that the Democratic Party is capable of or willing to rethink one. But there is a new agenda out there that all polling evidence suggests the vast middle of the American electorate (across party lines) is hungry for. All the political experts say there is no chance for a third party, a third agenda, or a temporary alliance of independents. But the world keeps changing, the next American economy poses huge challenges, and we've all just had another extended lesson in the dysfunctional nature of our current politics. Why can't this debacle we just survived be the moment that catalyzes the widespread sense there has to be a better way?

    Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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  • President Obama's Best Move is to Force a Government Shutdown

    Sep 30, 2013Bo Cutter

    Bo Cutter witnessed the government shutdown of the mid-'90s firsthand as part of the Clinton budget team, and he argues that it's time to let it happen all over again.

    This brief commentary is my first for a while. It's intended for President Obama's administration. The message is straightforward: accept the tooth fairy into your midst; welcome the gift that keeps on giving (a.k.a. the Republican House); do not seize defeat from the jaws of victory. Force a government shutdown.

    Bo Cutter witnessed the government shutdown of the mid-'90s firsthand as part of the Clinton budget team, and he argues that it's time to let it happen all over again.

    This brief commentary is my first for a while. It's intended for President Obama's administration. The message is straightforward: accept the tooth fairy into your midst; welcome the gift that keeps on giving (a.k.a. the Republican House); do not seize defeat from the jaws of victory. Force a government shutdown.

    Very few presidents have ever been as lucky in their opponents as President Obama. Now is the perfect moment to leverage that luck and avoid a much harder fight (the debt ceiling) in a couple of weeks. It is the case that all political disputes have to end in negotiation, but when you can choose the terrain and terms for the negotiation, it is folly to pass up the chance.

    We are deluged with news about the situation, so I won't belabor the back story. The House has passed a continuing resolution funding the government and defunding ObamaCare (I don't have a problem with the right's name). The Senate will pass a resolution funding the government and taking out the de-funding provision. This resolution will go back to the House, where Speaker Boehner will have to make a decision.

    So what should the president do? I argue that now is the time to jam the House. The president ought to make it very clear that he would not regard it as a tragedy if the Senate sent its resolution back to the House at about 5 p.m. today. The Speaker had plenty of time this weekend to decide what he wants to do and could get something done by midnight if he acts. But the extremists in the House won't let the Speaker act sensibly, and they ought to be given the chance to pay a price.

    What will happen? The government will begin to shut down. A lot of good, hard-working civil servants will be sent home. Travel will mostly stop, and programs will grind to a halt. Parks will close; bills won't be paid; decisions will be unmade and will pile up. Really essential activities won't stop. It will all be a mess, an enormous inconvenience, a vast waste of money. But it won’t be a catastrophe.

    And the Congress - particularly the House, which already has approval levels somewhat less than my shoe size - will be blamed. It will then have to act very quickly, and it will turn around and fund the government with a plain vanilla resolution. More importantly, having made clear its disregard for the wellbeing of ordinary Americans, the House will be standing on very thin ice when it threatens to force default over the debt limit on precisely the same grounds, defunding ObamaCare.

    I know that doing all this requires the administration do some things that - to put it gently - have not been their strong suits: thinking strategically, recognizing opportunities, understanding risk, and bargaining at least as well as a good used car salesman. But this all happened before with President Clinton in 1995; it came out pretty well for him then, and the opposition to President Obama today is nowhere near as good as Newt Gingrich was then.

    Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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  • Audacity, Audacity, Always Audacity: Why Obama and Baucus Should Push for a Carbon Tax

    Apr 29, 2013Bo Cutter

    A carbon tax would bring long-term rewards, but it will take leaders willing to make short-term sacrifices.

    We are at an unacknowledged turning point for the economy and the environment. We could, right now, substantially reduce our debt and deficit projections, take a major step toward a better environment, create a simpler and fairer tax system, make job creation easier, and raise economic growth a bit. For all of these reasons, we could and should adopt a carbon tax.

    A carbon tax would bring long-term rewards, but it will take leaders willing to make short-term sacrifices.

    We are at an unacknowledged turning point for the economy and the environment. We could, right now, substantially reduce our debt and deficit projections, take a major step toward a better environment, create a simpler and fairer tax system, make job creation easier, and raise economic growth a bit. For all of these reasons, we could and should adopt a carbon tax.

    Taking this step depends on two men: President Obama and Senator Max Baucus, chair of the Senate Finance Committee. Both men want to leave an important legacy, and both are in a unique political position: they still possess real political power, but neither will ever face another election. (Obama, of course, is limited to two terms, and Baucus has just announced that he will retire.) Acting together, the two of them could completely change the odds of enacting a carbon tax this year.

    Right now, if you ask around, as I have, there are many across the ideological spectrum who agree that a carbon tax would help us solve a lot of problems, but they won't take a public step because they see no leadership support. My own gut feeling is that there would even be energy industry support for a carbon tax. President Obama and Senator Baucus could change this picture by making a carbon tax a priority and building bipartisan support for the project.

    Why should we care? Let's look at four issues: federal revenues, the tax system, jobs, and – oh, yeah – the environment.

    First, a carbon tax of $20 a ton would raise about $120 billion a year, or $1.2 trillion over a decade. Right now, everyone anywhere near the budget debates is in a convenient and delusional state of mind about revenues. The conventional wisdom is that we either do not need more revenues or they are easy to find. So here are some counter-assertions: (1) despite the right’s imaginations, we are not going to cope with the retirement of the boomers, the doubling of folks on Medicare, and our need for fundamental infrastructure investment without new revenues; (2) despite the speeches the left makes to itself, the problem won't be solved by taxing whomever the left decides is rich; (3) we aren't going to end the home mortgage and charitable deductions. There will come a point when $1 trillion in new revenue over the next decade that actually makes the economy and the world a little better will look pretty interesting, so why not try for it now?

    Second, the tax system is a mess and more caught in a state of political gridlock than even the rest of the federal budget. The system is far too complicated, and it probably lowers economic growth and job creation. More practically, raising new revenues from this structure is next to impossible; the 40-year strategy of broadening the base and lowering rates (a strategy I agree with) has played itself out. With the carbon tax's $1 trillion, you could exempt low-income families, reduce the payroll tax, lower overall tax rates, and still bring down the debt and deficit. Sure, there would be fights about how to use the extra revenue, but those are fights the political system is supposed to have.

    Third, jobs. We rely way too much on payroll taxes. They are very, very inefficient, and they directly and visibly add to the costs of job creation. Back when the U.S. economy was an unstoppable job machine, these taxes looked as though they were cost-free. Not anymore. I am optimistic about our long-term economic prospects, but I also think the jobs of the future will require much more education and training content than the jobs of the past, and therefore employers will be much more sensitive to other costs, i.e., taxes. Anything sensible we can do to make job creation easier and less costly is a step we should take.

    Finally, the environment. A lot has been published recently about climate change and its sensitivity to greenhouse gases. Cutting through all of the models and the uncertainties, the net conclusion is that warming is probably a small bit less sensitive to greenhouse gases than we have thought. Climate change deniers have used this for the obvious purposes. But the actual end conclusions haven't changed much. At current rates, we will put half a trillion more tons of carbon into the atmosphere by 2045 and 1 trillion more by 2080. Because of this the Earth's temperature will probably warm about three-quarters of a degree in the next 30 years and 1.5 degrees over the next 50. (30 years may seem a long time to some of you; from my perspective, it's a blink of an eye away.) And the math keeps suggesting that the earth's sensitivity to extreme events is increasing more rapidly than global warming. So the future may be less hot but more dangerous.

    Isn't it worth a small amount of political difficulty and a fairly small tax now to slow down these trends? Everyone in politics talks a lot about political courage – mostly their own. As far as I can tell, political courage normally consists of doing something your supporters love and your opponents hate and then bragging about it. But maybe the two leaders I mentioned at the start will realize that they can afford to change that definition and leave a real legacy.

    Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

     

    Melting Earth image via Shutterstock.com

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