(What’s Left of) Our Economy: Don’t Forget! U.S. Manufacturing Output Could be Overcounted!

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I’m chagrined to admit that, in the rush to blog in a timely way about economic data, I’ve lost sight of a big orange flag that needs to be waved regarding the U.S. Government’s manufacturing production statistics.

These data deserve special importance, in my opinion, both because of industry’s special importance in creating a genuinely durable American prosperity, and because they represent a gauge of manufacturing’s health that should be relatively uncontroversial (unlike, for example, manufacturing employment, which generates heated debate over whether it’s mainly been falling for worrisome reasons, like declining competitiveness, or ultimately heartening reasons, like productivity growth).

But that doesn’t mean that the manufacturing output figures put out each month by the Federal Reserve are problem free. In recent years, researchers have marshaled impressive evidence that these inflation-adjusted numbers have been considerably overstated by flaws in measuring rapid price declines in information technology hardware. More specifically, because the prices of surging imported inputs (parts and components) in these sectors supposedly are falling much faster than government statisticians can track, the inflation-adjusted production of the American made content of these goods has been growing much slower than Washington has reported. According to the most authoritative investigation, this overcount amounted to as much as 20 percent between 1997 and 2007.

Without commenting on whether this conclusion is fully or partly justified, it’s still revealing to show how profoundly production in IT hardware has affected real manufacturing output since the Great Recession struck.

In this exercise, I’ll use July, 2007 as the baseline – not the recession’s official start that December – because that was the month high tech hardware goods production peaked. From that point, through the end of the recession in June, 2009, inflation-adjusted manufacturing output overall plunged by 20.16 percent. But strip out computers, computer parts, semiconductors, related devices, and telecommunications gear, and the real manufacturing output drop was somewhat greater – 21.48 percent.

The gap between the two has been wider since the recovery began. From June, 2009 through last month, real manufacturing production has grown by 27.41 percent. But if IT hardware is removed, this figure falls all the way to 22.43 percent. That’s not as big a difference as that between manufacturing output and the (so far) booming automotive sector (27.41 percent versus 20.42 percent), which I described last Friday. But it’s significant nonetheless.

Another way to portray the importance of high tech hardware to domestic manufacturing’s fortunes: U.S.-based industry is 1.73 percent larger as of last month in real terms than it was in July, 2007 – the pre-recession peak for inflation-adjusted IT production. But strip out that IT output, and domestic manufacturing’s real production is down by 3.87 percent during this period.

In July, the Commerce Department, which generates most of the U.S. Government’s raw economic data, announced it would create a “data czar” (my term for its planned “Chief Data Officer”). Everyone concerned with the fortunes of domestic industry should hope that Secretary Penny Pritzker reveals her choice sooner rather than later, and starts getting the position filled. Without better data, too much of American economic policymaking – and analysis inside and outside government – will continue to be based on flying if not blind, then seriously vision impaired.

(What’s Left of) Our Economy: Foreigners’ Still Keep the Faith in King Dollar

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It wouldn’t be right to let much more time pass before reporting on the new numbers from the Treasury Department showing how much in the way of U.S. government debt is held by foreigners, including by foreign central banks and other arms of foreign governments.

These monthly data sets are closely followed by finance geeks and some trade specialists because they shed light on critical economic questions (mainly, how much longer the rest of the world will keep on funding America’s habit of living beyond its means) and national security questions (how much influence over U.S. politics and policy might be wielded by creditors whose primary interests are not the well-being of the American people).

That economic question has loomed especially large because even though most outstanding debt is held by Americans themselves, there’s legitimate concern that foreign lenders own than enough to affect interest rates. More specifically, many American leaders and analysts have worried that overseas interests may tire of lending ever more money to an economy that keeps going ever deeper into the red, and will at least start demanding more compensation (i.e., higher rates) for the greater risk they’re being asked to assume.

That kind of tightening would almost certainly slow an already historically sluggish U.S. recovery. Yet if the Federal Reserve held rates steady and simply printed more money to fill the gap, the U.S. dollar could start weakening dangerously, and inflation in America could genuinely take off.

The good news contained in the new Treasury figures is that foreign lenders are more than happy to let Americans’ consumption party continue. Of course, if you’re worried that profligacy can’t indefinitely serve as a national business model, and that continuing huge U.S. international deficits keep threatening to trigger a repeat of the last global financial crisis, that’s also the bad news.

As of August, total foreign holdings of America’s official debt bounced back from a July dip to hit an all-time high of just over $6.066 trillion. Foreign government holdings kept rising month to month, too, and also hit a new record – just over $4.157 trillion.

The figures on some individual countries’ U.S. official debt holdings are noteworthy, too. China is now America’s biggest foreign creditor, which is worrisome in part because of its increasingly aggressive foreign policy in the East Asia Pacific region. It bought $4.8 billion in American government debt in August and raised its holdings to just under $1.270 trillion. That’s below the monthly record Chinese lending hit of nearly $1.317 trillion in November, 2013, but not very far below. In fact, this lending has remained around $1.270 trillion ever since. So there doesn’t seem to be much evidence that Beijing’s stated desire to see its yuan assume a more important role as an international reserve vis-a-vis the dollar is leading it to unload greenbacks.

France has bitterly complained about the dollar’s global predominance for decades, including recently. But France’s dollar holdings also rose in August after dipping in July, and are up more than 13.60 percent since last August.  The BRICS countries (Brazil, Russia, China, India, and South Africa) say they’re so upset about the dollar’s “hegemony” that they’ve formed their own development bank. But as a group, the non-Chinese members steadily keep buying dollars, too.

If there has been a valid reason for concern about foreign dollar buying, it comes from taking a longer perspective. Since March, foreigners’ overall U.S. Debt holdings have increased an average of 6.18 percent year on year. That’s a bit less than the 6.71 percent average for the comparable 2012-13 year-on-year increases. But it’s less than half the 12.74 percent average from 2011-2012.

At the same time, clearly U.S. investors have more than stepped in, and helped keep U.S. Treasury yields low. Moreover, these new August figures precede September and October, when global worries about rising geopolitical tensions and slowing growth in China and Europe in particular triggered a major flight into dollars that pushed the exchange rate way up and interest rates another leg down. Unless foreign investors almost completely avoided the temptations of the dollar’s well established safe haven status, expect the next few sets of monthly Treasury figures to show their dollar holdings strongly on the rise again.

Im-Politic: Why the Mainstream Media is an Ebola Lapdog, Not a Watchdog

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Although I’m neither a doctor nor a biologist nor a public health expert, I keep writing on Obama administration’s response to the ebola outbreak. For the president’s continued opposition to a travel ban to fight the disease speaks volumes about the political and governing establishments’ devotion to dogma about the virtues of completely Open Borders, economic globalization, and political correctness, and about the evils of any kind of nationalism, at the expense of public safety. I return to the subject today to deal with another angle – the mainstream media’s (MSM) role in upholding this establishment line.

No doubt many of you have already come up with reasons why: e.g., the reflexive internationalism and political liberalism of the MSM, along with its close social ties with these ruling elites – ties which have only intensified as journalists, public officials, and other political figures increasingly move back and forth among these occupations.

But recent commentaries have revealed another source of the MSM’s determination to banish support for an anti-ebola travel ban from the realm of respectable opinion: an uncritical worship of credentialed expertise.

At first blush, this claim sounds absurd. Doesn’t the MSM make its living by exposing official wrongdoing and ineptitude, as well as pretensions of public spiritedness, competence, and omniscience? Isn’t skepticism about authority practically the sine qua non of the journalistic personality, and of any reporting worth its salt?

Yes and No – but arguably for the most part No. There’s the aforementioned blurring of occupational lines reflecting the MSM’s growing tendency to come from the same backgrounds of affluence and elite schools as members of other sectors of the American establishment. As a result, they inevitably tend to marry one another, live in the same neighborhoods or the same kinds of neighborhoods, and/move in the same overlapping professional and social circles. Thus it’s not surprising that they share many of the same social and cultural norms and perspectives, even though their party politics often differs.

One natural result is the MSM’s strong support of the most important elements of the status quo – the existing structures, systems, and values that organize society, politics, and the economy, and give them purpose. And one of the most popular values (or myths – take your pick) in the United States entails the existence and superiority of a meritocracy.

Of course, the privileged lives led by most of the MSM powerfully incline its members toward meritocratism. A more conveniently self-serving way to explain its evident success – which consists not only of wealth but prominence and influence – is hard to imagine. Why, then, shouldn’t the MSM assume the same excellence in those anointed as experts by society in other fields of endeavor? Even those that are not personal friends neighbors of MSM members have passed the same test and been vetted by the same kinds of institutions.

In fact – and here I’m revealing one of its dirtiest, most important secrets – the MSM is even more inclined even than other successful Americans to lionize credentials in other occupations and especially professions. The reason? Despite the degrees conferred by schools of journalism, the professional-like societies they have created, and the multitude of awards they hand out to each other, journalists generally recognize, at least subconsciously, that theirs is not a genuine profession. Excelling requires the mastery of no body of technical knowledge – at least none that can’t be achieved in literally 15 minutes, like the standard form for writing a hard news story.

Hence the MSM’s built-in respect for those whose titles do require long years of study of famously complicated subjects, like the workings of the human body or centuries-old, constantly growing masses of statutes and jurisprudence. But it’s important to note the MSM’s inordinate regard for other pseudo-professions as well (like “public affairs”) and for pseudo-sciences (like economics).

Not that the MSM is incapable of skepticism. But the record seems to show that it usually reaches critical mass only after a group of experts has brought on disaster. Thus very few MSM members questioned the conventional wisdom among national security experts that a light was visible at the end of the Vietnam tunnel, or economists who insisted that the unprecedented indebtedness of American households and the equally unprecedented surge in home prices were signs that This Time It Was Different, not that dangerous bubbles were inflating. In other words, the MSM watchdog too often barks only after the break-in has succeeded.

Indeed, although skepticism skyrockets for a time after disaster strikes, MSM idolatry of expertise is so strong that, once the rubble clearing begins, reporters and commentators as a rule return to relying overwhelmingly on these proven failures as sources of information and analysis.

Thankfully, the United States so far has escaped an ebola disaster – so the MSM has energetically denounced anyone dissenting from the judgment of physicians and public health officials that a ban on visitors from West African hot zone countries would be not only ineffective, but counterproductive. Typical has been this lead from NBC News: “There are reasons the U.S. hasn’t enacted a travel ban on countries where Ebola has broken out: It wouldn’t work and could actually make things worse, health officials say. Still, that’s done little to quell the calls for a ban.”

And this lead from Politico: “The political momentum for a travel ban on West African nations continued to swell Thursday, but health and transportation experts were uniform in saying it wouldn’t stem the spread of Ebola — and could do more harm than good. That hasn’t stopped politicians and pundits — ranging from House Speaker John Boehner to former Obama press secretary Jay Carney— from calling for a travel ban.” And this headline from HuffingtonPost: Lawmakers Ignore Experts, Push For Ebola Travel Ban.”

Indeed, so strong is the MSM’s expertise worship that it’s even overcome Ana Marie Cox, a Daily Beast contributor who first gained fame through reporting on a sex scandal that titillating the publicly prurient Washington, D.C. branch of the chattering class. This proudly sauciest of wenches sternly admonished viewers of Fox News’ Media Buzz program, “There is an empirical answer to that question – there is an empirical, scientific answer as to what we should do to prevent the spread of ebola. If you have an ‘R’ or a ‘D’ after your name, you should not be talking about this. If you have an ‘MD’ after your name, you should be talking about this.”

Apparently Cox has never heard of a doctor blowing a diagnosis. Or of practitioners of the far softer art of “public health” mishandling an epidemic. Which perhaps points to additional problems with the MSM’s deference to authority: First, nothing could be clearer in recent weeks than the fallibility of so-called medical experts leading the fight against ebola. Whether neglecting the virus’ latest outbreak in West Africa or creating “protocols” for treatment that were in some cases not only flawed but fatally flawed, the experts themselves have acknowledged the kinds of mistakes that haven’t induced much humility on their part, but that rightly have cost them the confidence of many Americans.

Second, the ebola consensus in the healthcare community is not nearly as solid as the MSM typically suggests. Support for a travel ban is anything but nonexistent, and some researchers have even cautioned that knowledge about ebola’s transmission mechanisms could be substantially incomplete. Put differently, the science surrounding a disease discovered 40 years ago is anything but “settled.”

Combine the MSM’s pro-credentialed-expertise instincts with its clear political leanings on globalization- and political correctness-related issues and you have the scandal that constitutes its ebola travel ban coverage. Thanks to the emergence of alternative media, the public interest is increasingly likely to survive this dereliction of duty. But its declining audiences and worsening financial fortunes indicate that may not be true for the MSM.

Im-Politic: This was Paul Krugman’s Finest Hour

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Having been slimed by him in print (debating an issue on which I was right!), I’m no fan of Paul Krugman’s. I also disagree with the Nobel Prize-winning economist and New York Times columnist on any number of economic and other issues, and strongly object to his habit of dismissing nearly all those differing with him as ignoramuses and/or toadies of America’s plutocrats. (Not that there aren’t lots of commentators and analysts falling into one or both categories.)

But I believe Krugman richly deserves praise for a recent display of intellectual honesty that urgently needs to become a lot more common in America these days: He admitted he didn’t know enough about a subject to warrant writing about it extensively. Thus Krugman didn’t dwell much on President Obama’s foreign policy record in his recent Rolling Stone article defending the president’s overall record. His explanation?  The truth is that I have no special expertise here….”

Let me be clear here. I am not saying that Krugman – or anyone else lacking academic training, professional experience, or any other obvious qualification – lacks the right to opine on foreign policy, or on any other subject. Foreign policy and national security, in particular, have only the scantest claim to be seen as academic disciplines, and certainly many practitioners have turned out to be complete incompetents, whether academically trained or educated in the school of hard knocks.

Nor am I saying that expertise in one field is never transferable to another. Moreover, “It’s a free country.” In fact, I wish everyday Americans would speak out more on major public issues, and that the political, economic, policy, and academic establishments would pay them more heed.

At the same time, it should be clear that we’ll have the most useful national debates if those with legitimate expertise or experience in certain fields don’t simply assume that these qualifications entitle their views in other fields to any special status. Indeed, more often than not, because their privileged lives tend to undermine their common sense, experts speaking out of school tend to produce the worst of all possible analytical worlds. As a result, it should also be clear that the media must start exercising better judgment in seeking commentary.

But few of the high and mighty demonstrate any self-discipline, and the media keep  uncritically worshipping any form of prominence, no matter its source, and so we have the constant spectacle of valuable ink and airtime eaten up by know-nothing celebrities discoursing on any number of national and international issues with make-or-break potential for America and the entire world.

That’s why Krugman’s admission in Rolling Stone is so noteworthy. Even better, it shows he has a learning curve, for he wasn’t always so self-effacing. And maybe the biggest blessing of all is his modesty’s appearance in a magazine widely read in the entertainment world. Maybe Rosie O’Donnell and Ben Affleck will take the hint?

(What’s Left of) Our Economy: Can U.S. Manufacturing’s Rebound Continue Without Automotive?

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If you harbor any doubt that the automotive sector has been driving domestic U.S. manufacturing’s fortunes since the Great Recession began, and into the current historically weak recovery, throw them overboard.

I’ve just finished giving my blazing new laptop a workout by doing a deep dive into yesterday’s industrial production report from the Federal Reserve. The new figures make absolutely clear that, so far, as goes automotive, so goes manufacturing – and whatever valid hopes for a renaissance are still justified. Moreover, they indicate that the next few months may go far toward determining whether manufacturing’s rebound from an horrific recessionary downturn can continue much longer.

Certainly this pattern has held since the U.S. economy’s most recent woes began in earnest. From the recession’s December, 2007 onset through its official end in June, 2009, overall manufacturing production fell by 20.48 percent in inflation-adjusted terms. But strip out autos and parts, and the downturn was somewhat less dramatic – 18.14 percent.

You can follow along here by clicking on the seasonally adjusted January 1986 to present link here at the homepage of the Fed’s interactive production databases.  Warning!  Major eye strain could result! :)

Since the recovery began, overall manufacturing has grown by 27.41 percent after inflation. But without vehicles and parts, this real growth sinks to 20.42 percent. Put differently, manufacturing production is now up by 1.31 percent in real terms over the nearly seven years since the recession began. But without the booming auto sector, it’s actually down by 1.42 percent.

The trend shows some signs of slowing – but only some. For example, look at the numbers this year since March (to avoid the distortions caused by the severe winter). From March through September, overall manufacturing production has grown by 1.86 percent post inflation. Without automotive, the real growth rate has been only 1.61 percent. That’s a 13.50 percent difference.

During the recovery, the growth gap was nearly twice as big – 25.50 percent. But from March, 2013 through September, 2013, the gap was smaller – 10.11 percent.

One big consequence of automotive’s lead role in the last few months is that its volatility has helped produce big swings in real manufacturing output. During July, a monster 9.39 monthly jump in real automotive output helped boost overall monthly manufacturing production up 0.82 percent – its best performance since the final stages of the recovery from winter in March. Without that increase – the biggest in percentage terms since September, 2009, when production was in its early post-recession bounce – manufacturing grew by only a negligible 0.13 percent.

The automotive sector took a breather in August, as real output sank by 6.98 percent – the worst monthly performance since April, 2011. The rest of American industry eaked out a 0.01 percent inflation-adjusted output gain. But the automotive falloff pushed overall production down by 0.46 percent – its worst since the winter-aided 1.03 percent plunge in January.

The automotive slump continued in September, as production after inflation decreased another 1.40 percent. The rest of manufacturing managed to expand by a solid 0.58 percent. But autos and parts dragged overall real production down to 0.47 percent.

The last two months’ worth of data of course indicate that after leading the manufacturing rebound, auto and parts production is now holding it back. Whether the rest of U.S. industry can keep growing satisfactorily without robust auto output, or whether recent automotive struggles will extend to the rest of manufacturing, will shape not only domestic industry’s future, but the entire economy’s.

Housekeeping: Back at Full Strength!

Hi, folks! If some of you regulars and others think you’ve noticed a little less activity than usual on RealityChek over the last week — you’re right! I’ve been working on a dying computer recently, and it’s made posting and especially answering correspondence difficult.

The good news is that I’ve now got a replacement and am back at full strength! I’m looking forward very much to plunging back into the news and to re-engaging with all of you who have been kind enough to share your thoughts. All non-spam-type comments — even the snarky ones — are greatly appreciated, as is your interest in this blog and the issues it covers. See you tomorrow morning!

Housekeeping: Back at Full Strength!

If some of you regulars and other visitors think you’ve noticed a little less activity lately on RealityChek — you’re right!  I’ve been working over the last week or so with a dying laptop, and it made everything — especially responding to your comments — excruciatingly difficult.

The good news is that I now have a replacement, and am back at full strength!  I’m really looking forward to plunging back into the news, and to reengaging with those of you who have been kind enough to share your thoughts.  All comments and questions — even the snarky ones — are greatly appreciated.  See you tomorrow!

(What’s Left of) Our Economy: Weak Internals in the New Industrial Production Report

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The new Federal Reserve industrial data revealed that real U.S manufacturing production bounced back in September from its first monthly decrease since January, but downward revisions for prior months showed that growth has been sluggish since May. In addition, the heretofore booming automotive industry experienced its first consecutive monthly inflation-adjusted production drops since November and December, 2010. Further, if automotive is stripped out, real manufacturing output is now down since the previous recession began in December, 2007.

Here are the manufacturing highlights of the Federal Reserve’s new release on September industrial production:

>This morning’s data reported that domestic manufacturing’s monthly output after inflation recovered from a downwardly revised 0.46 drop (its first since January) to a 0.47 percent increase.

>Yet downward revisions in May, June, July, September, and August, reduced domestic industry’s real output since May to a negligible 1.14 percent. Since July, this output is up only 0.32 percent.

>In addition, September’s increase combined with these revisions have left total inflation-adjusted manufacturing production just 1.31 percent higher than the level it hit when the last recession broke out, in December, 2007.

>So far, much of manufacturing’s recovery since the mid-2009 end of the recession has been led by a torrid automotive sector. Yet in September, after-inflation output of vehicles and parts makers dropped for the second straight month – its first such back-to-back decrease since November and December, 2010.

>Without the automotive sector, moreover, real manufacturing output since the recession’s onset is now down 1.42 percent.

>Further, according to the September figures, manufacturing’s year-on-year growth has now slowed since July, though it remains above even figures in the spring, following the sector’s recovery from harsh winter weather.

>September’s monthly manufacturing output gain followed an August drop revised down from 0.40 percent to 0.46 percent, a July drop revised from 0.82 percent to 0.84 percent, a June gain revised from 0.33 percent to 0.31 percent, and a May increase revised from 0.44 percent to 0.39 percent.

>Year on year, September real manufacturing production was up 4.11 percent. August’s initial 4.02 percent year-on-year gain was revised down to 3.87 percent, and July’s was revised down from 5.19 percent to 5.02 percent. The May and June figures remained roughly unchanged.

>The September figures did continue a string of 2013-14 monthly year-on-year real manufacturing output increases that have exceeded their 2012-13 counterparts. From September, 20123 to September, 2013, inflation-adjusted manufacturing production rose only 3.10 percent, and the comparable figure for August was only 1.83 percent.

>September’s monthly real automotive production decline of 1.40 percent followed a 6.93 percent August nosedive that was revised up from 7.63 percent. July’s big jump was revised up from 9.25 percent to 9.39 percent.

>September year-on-year real automotive output’s increase of 5.70 percent is down significantly from the 8.96 percent rate in August, the 21.63 percent gain in July, the 7.52 percent rise in June, and the 8.79 percent improvement in May.

>The longstanding gap between the fortunes of America’s durable and nondurable goods manufacturers remained substantial as of September, but the nondurables sector continued a recent trend of catching up.

>September real durable goods production rose 0.45 percent on month after the automotive sector led it to a 0.96 percent drop. On a year-on-year basis, inflation-adjusted durables output kept slowing gradually – from 5.80 percent in May to 5.38 percent in September.

>Since the recession’s December, 2007 onset, durable goods production is up 8.69 percent in real terms.

>Nondurable goods production followed up its 0.13 percent monthly August gain after inflation with a 0.49 percent increase – higher than the rise for durables manufacturing. And whereas durables output has been slowing on a year-on-year basis, nondurables output has been quickening – from 1.57 percent in May to 2.68 percent in September.

>Since its pre-recession July, 2007 peak, nondurable manufacturing output is still down 7.16 percent in inflation-adjusted terms.

(What’s Left of) Our Economy: As Energy Goes, So Goes U.S. Manufacturing

I won’t write anything today about the scary crazy session we’re having in the stock and oil markets because my knowledge of these is way too meager to deserve a significant audience. But the recent nosedive in oil prices would be sending an important message about America’s manufacturing sector and its supposed renaissance even if it wasn’t signaling a worrisome global growth slowdown.

The message is: Because much of the rebound engineered by domestic manufacturing following its historic recessionary downturn was based on energy and energy-related products (which of course include everything needed to operate oil and gas fields and pipelines), industry could face real troubles if global energy markets turn bearish big-time.

According to a June report from the Commerce Department, “just two industries have accounted for nearly half the rise in shipments: transportation equipment and petroleum and coal products. “ Similarly, “Transportation equipment and refined petroleum (and coal) products captured 43 percent of [manufacturing’s] export gains.” Note, moreover, that these categories don’t include all the steel and other metallic pipe and tubing and machinery whose output boom owes to surging U.S. oil and gas production.

The U.S. energy revolution is undeniable and will continue to create enormous economic benefits for the nation regardless of any near-term troubles, along with the national security-related blessing of greater energy independence. But today’s turmoil may be teaching that it’s too slim a reed on which to build a genuine – meaning sustainable – renewal of domestic manufacturing.

Our So-Called Foreign Policy: Clueless Versus ISIS

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If I was President Obama, I’d be thanking my lucky stars that U.S. financial markets today are looking like roller coasters because investors apparently are at last losing faith that even more free money from the Federal Reserve and other major world central banks will turn the current global recovery into something more than an embarrassment. And that Washington’s approach to fighting ebola apparently has a few more holes than officials initially let on.

Bad as that news is, it’s at least distracting the public and much of the media from growing evidence of utter administration incompetence in the battle to destroy ISIS’ terrorist army in the Middle East.

Those Americans who have continued to follow Middle East turmoil rightly worry about the ineffectiveness of the president’s strategy of combating ISIS through U.S. (and a little allied) air power plus (somehow) mustering enough ground strength from countries and insurgent forces in the region to accomplish the mission. But I’m even more worried that the administration has completely lost sight of what need to be America’s overriding goal.

As I’ve written, the endgame Washington should be seeking is marginalizing the Middle East to America’s fate through domestic measures – sealing the border and ensuring ever greater energy independence. The results would be an America substantially protected from the main actual and potential threats it faces from the Middle East: another major terrorist attack, and major disruption in world energy markets. Of course these goals will be difficult to achieve. But such successes are much likelier than indefinitely keeping the lid on terrorism overseas because nations always have more control over what happens domestically than abroad.

But because these jobs remain unfinished – especially establishing adequate control over entry into the country – for the time being, the nation must also act militarily against ISIS.

It’s good that the president has finally realized this – or has been pushed into acting as if he realizes this. But tragically there’s no reason to think that he understands what military force needs to accomplish above all until immigration and energy policies can neutralize Middle East threats. Job one needs to be preventing ISIS from consolidating firm enough control over enough territory to create a haven for bases and training camps that can support 9-11-like attacks.

Al Qaeda was granted this sanctuary when the Taliban took over Afghanistan, and destroying this capability has been the achievement that has justified that grueling effort. U.S. strategy in Iraq and Syria needs an identical focus. As the Afghan war has demonstrated, success has not required any nation-buildng progress. In fact, trying to bring Afghanistan out of the 13th century has seriously distracted allied forces from the major imperative – keeping the Taliban out of Kabul, and harassing its forces and Al Qaeda fighters sufficiently to keep them completely off balance.

Relentlessly harassing and indeed disrupting ISIS forces should be America’s current priority as well. And that’s why it was so discouraging to hear Secretary of State John Kerry say this week that America could afford to let the Syrian Kurdish town of Kobani fall to ISIS because the top U.S. goal these days is “to rebuild some of the morale and capacity of the Iraqi army. And to begin the focus of where we ought to be focusing first which is in Iraq. That is the current strategy.”

These remarks strongly indicate that Kerry – often described as one of the adults on the Obama foreign policy team – has no clue that it doesn’t matter where ISIS consolidates control. A terrorist sanctuary that winds up being established mainly on Syrian territory would be just as dangerous to America as a sanctuary mainly located in Syria. American and coalition military actions, therefore, need to target concentrations of ISIS forces wherever they’re found.

Americans can be thankful that geography gives the nation options against threats like terrorism that most other countries lack. But they’ll never be nearly as secure as they should be unless they start electing leaders smart enough to capitalize on these advantages, not ignore them.

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