Piling it On

This is not looking like a good week for optimists.

The NBER threw in the towel and decided that despite the discrepancy between quarterly GDP forecasts and the official definition, the US downturn started in December 2007. Before people start grumbling about the worthless academics taking too long to get in touch with reality, remember when the stimulus package to "real Americans" was supposed to save the economy? Those were the days...

Mankiw and Cowen have good NYT editorials on the economy, in particular on what lessons we should really be taking from the '30s.

But, you shouldn't become too wrapped up in worrying about the economy. According to a bipartisan Congressional task force, you should also be worried about an attack on the US using weapons of mass destruction, the odds of which "are now better than even" between now and 2013. The report points out that a biological attack is more likely than a nuclear one, though nuclear proliferation and the destabilization of Pakistan will make loose nuclear weapons likely threats. It says the next attack on the US will also most likely originate from the Federally Administered Tribal Areas of Pakistan.

But, before we decide to stick to that promised policy of preemptive intervention to kill terrorists on Pakistani soil, it might be worth considering the precedent we're setting. Because there's a country that already has and it believes it has been once again attacked by terrorists based in Pakistan. Already, India has taken Obama's stance to indicate that it too has the right to kick down doors in the pursuit of justice. As Robert Kaplan, India faces a far graver threat from Islamic terrorism than the United States does.

Yet a policy that allows such attack on India's part could easily end up with a nuclear exchange - note that Pakistan does not have a "no first-use" policy on nuclear arms. While launching nuclear weapons at the United States would be futile, Pakistan does have a credible deterrent against India. This will likely be the second time that the United States must navigate its way through an Indo-Pakistani crisis while fighting the war on terror in Afghanistan.

Calls for Obama to take the "regional approach" and use Kashmir to convince Pakistan to contribute more troops to dealing with Islamic fundamentalists in its own borders and cease support for them outside of them seem more unrealistic than ever. India was hostile to the idea before the attacks, it will not be amenable to them now. The ideal outcome would be greater cooperation between the two powers on counterterrorism, but this is incredibly unlikely. As tensions increase, the US will find that Kashmir negotiations will not be able to proceed without taking sides, and treating Kashmir as a way to deal with American concerns about Afghanistan will inevitably draw the US to a pro-Pakistani line.

India has endured decades of Islamist violence on its own soil. If this sort of thing happened to the United States, we'd have taken up Armitage's cry and bombed them into the stone age. But we cannot expect that they will continue to tolerate such tragedies in a manner conducive to our goals. One way or another, Indians will feel compelled to respond. Relying on the Kashmir approach to win the war on terror is not viable. India, for its part, however, must improve its counterterrorist efforts. Watching Indian footage, city police fired at Kalashnikov-wielding terrorists with ancient bolt-action rifles while the response of more professional units has not impressed American analysts either. While there's obviously a lot more than small arms deficiencies that contributed to the problem, they are symptomatic of a deeper problem. India has invested well in its regular military but left the provincial-level counterterrorist and police forces underfunded. Terrorist attacks are thus more effective against India, and India cannot respond with its regular military without triggering a nuclear crisis. (We, too, struggle with managing the traditional gap between domestic law enforcement and the use of our military abroad. Fortunately we've managed to get by without a nuclear war scare... So far.)

The important thing to remember during all of this is that al Qaeda is hoping we'll overreact. Based on the latest tapes, they're having trouble coming up with an effective message against Obama without any policies of his they can criticize. Al Qaeda needs to provoke Obama into making a big mistake that involves perceived aggression and injustice against Muslims to maintain its base of support. This is something his cabinet should keep in mind as January 20th approaches. While I still take issue with sending Hillary Clinton to Foggy Bottom, I'm far more pleased with Obama's other national security picks. That being said, no matter what happens to the economy, sidelining foreign policy will come with consequences. Obama had really better trust his staff, because he is going to be a busy, busy man.