Responsibly Using TARP for Jobs

Washington DC is abuzz over the $200 billion surplus from TARP. Many want to use that money to create jobs. However, the policy proposals are jumbled and incoherent. The democrats and Obama said something about green jobs, but no way on how to get there without massively re-writing the TARP authorization.

One impediment to job creation these days, according to business writers, is the absence of business credit. The business credit market is hardly moving at all. Most small businesses get their credit lines from local and regional banks, who have largely weathered through the financial crisis intact, but who are also scared of lending money. Despite the whole TARP bailout, and the Fed's rescuing of the commercial paper market, the business credit market remains choked off.

Therefore, one quick way for the Federal Reserve and the Treasury Department to jump start business lending, is to use the TARP money to finance business lending. We can build on the CDO-bailout model: We make the banks agents of the government. If a bank is going to lend out some money ($1 million, say) to a business, the bank can use TARP money to double the loan (plus $1 million TARP money). This way, we preserve some accountability, because the banks still have skin in the game. At the same time, we instantly double the size of the business loan market. The Fed and Treasury are not equipped to administer the small amounts in business loans, so using the banks as government agents minimize the administrative requirement.

I hope this idea gets some traction.

Bottom-Up Innovation: China

Alexandra Harney wrote an article on Foreign Policy.com today, bemoaning the lack of central direction from Beijing, in the area of industrial policy. She ended up arguing for more centralization, less local regulations, and voila, currency de-regulation. She compared China against Japan, where the Ministry of International Trade and Industry pretty much ran the country, economically speaking.

However, Harney fails to establish clearly why Bottom-Up innovation, seems the case in China, is worse than Top-Down Innovation, the case in Japan.

The general problem with an opaque policy-making process is that it imposes too many regulations and encourages corruption. Is that the case with China? Harney does not say.

Harney bemoans the saving nature of the Chinese consumers. What's wrong with that? A lower velocity of money helps to head off a bubble in China, which is good news for everyone (except perhaps India.)

Lastly, Harney talks about currency deregulation, but fails to establish why that's good. It seems to be conventional wisdom that currency pegging is bad, but conventional wisdom is frequently wrong. If the prices reflect the inputs, ie not artificially distorted, a pegged currency is not market-distorting. Now China may be giving up control of its monetary policy, but a currency peg is not automatically bad.

She also ignored the case of the United States, where we had 50 states running their own industrial policies. Which is the better model for China?

Iranian Revolution: Visualizing the Aftermath

Iran's less-than-lethal Insurgency is in the news again, when the college students mounted another protest and clash on Monday. At this point, it is clear that the Revolutionary Council does not have the political power to suppress the student insurgency. If this status quo holds, we will soon see the fall of the current Revolutionary Council, probably within 2 to 5 years. Whether it takes the form of a coup, a constitutional convention, or a violent revolution, however, is an open question. I will briefly explore the policy options to the US, then describe the possible end states.

At this time, there is little for the US to do, that it is not already doing. The current nuclear confrontation with the US is holding back the Revolutionary Council in manpower terms. The need to guard the various nuclear refinery sites, and to mitigate an air strike on the sites, prevents the Revolutionary Guards from moving these guards to Tehran to help with the crackdown. The manpower shortage of the IRGC allows the students to continue protests. The on-going economic embargo and maritime interdictions similarly limit the ability of the IRGC to operate against the students. Therefore, it is vital that we continue our peacetime confrontations and containment against Iran.

I will re-iterate my call for an American Embassy in Tehran, though. Such a move will head off the Hardliners' characterizing the protests as an American conspiracy.

Similarly, the US should refrain from material support of the student protests, other than refugee protection. There is plenty of light weapons in Iraq, should the protesters take up arms. And the Israeli Mossad is likely already aiding the insurgency.

Right now, the IRGC is being pulled in multiple directions. It has to continue supporting Hezbollah and possibly Hamas by sending out weapon shipments. Following the terrorist attack in Eastern Iran, IRGC has to step up security across the Persian empire to confront the ethnic separatists. The ongoing nuclear crisis means that they have to maintain the security posture at the nuclear sites. The possibility of an air strike means that all of the IRGC air defense sites (in addition to the Air Force air defense sites) need full manning. American stealth bombers and Israeli cruise missiles means the listening sites (where people listen for jet and missile sounds) need full manning, too. And they have to deal with the student insurgency. The IRGC is running out of people.

The Revolutionary Council is politically constrained, as well. Most of the college students are the sons and daughters of Iran's middle and upper class, many of whom working in the government bureaucracy. If the Revolutionary Council starts shooting protesters indiscriminately, they are bound to kill the children of senior government workers. Such a move would turn the bureaucracy, the machinery of governance, against them. In addition, the military has not taken a side in this insurgency. The military has to uphold the Iranian regime, but the children of the senior officers are marching in the streets. The council cannot afford to alienate the military.

So the status quo is leading toward a regime change in Iran. If the students keep on protesting, the protests will highlight the political constraints of the council, its limitations. The Revolutionary Council, like all totalitarian regimes, operates on the perception of its omniscience and omnipotence. People report on their neighbors because they are afraid of the reach of the secret police. If the Iranians find out that the IRGC has political limits, they will be less likely to report their neighbors and more likely to keep on testing the behavioral limits. The ethnic separatists will operate more openly. The black marketeers will be more brazen in hawking their wares. The decline of social controls will bring about more social disruptions. The protests will get closer and closer to the government buildings. At some point, the IRGC will have a showdown with the protesters, trying to restore its perception of control. If the students succeeds in embarassing the IRGC, that's when regime change will take place.

The critical question for the US and the West concerns Iran's nuclear program. If a revolution occurs, hopefully the nuclear program stays above the fray, and enters a conservatorship awaiting a legitimate government. A renegade IRGC commander may transfer nuclear material to a terrorist organization, although that possibility is slim due to the bureaucratic nature of a government entity like the IRGC. The military may take over the nuclear program during the revolution because it is a vital strategic bargaining chip for Iran as a state.

The nature of the student revolution remains unclear, because students operate on emotion. The last student revolution in Iran led to the current theocratic regime. The students today coalesced around the opposition to government oppression, but there is likely much disagreement on the endstate, of the revolution. Various politicians are trying to hijack the movement, with Mousavi and Rafsanjani being possible examples. A hijack is possible if a politician can bring a bureaucratic entity or a guild (the merchant or clerical guild, say) into the protest movement. This politician can ride the resulting goodwill all the way to the top. We will hear his name as soon as the IRGC kidnaps him.

Ideally, this revolution would lead to a new constitutional convention to re-write the constitution. This is a likely outcome because of the neutrality of the military and the government bureaucracy in general, so far. These entities serve as moderating influences on both the Revolutionary Council and the students, barring further radicalization and escalation. As neutral actors, they have the authority to strike a bargain, hopefully allowing the clergy to save face and take on a lesser role. Their governmental nature make them invested in the current form of government and resistent to radical changes. Minimizing change would minimize social upheavals and human suffering.

However, if the IRGC escalates by massacring protesters, Marxist-type revolutionaries will have more followers among the students. The radicalization of the movement will lead to a post-revolution purge we've seen in France, Russia, China, and elsewhere. A violent revolution would be inevitable.

Factions of the IRGC may, in self-preservation, stage a coup against the Revolutionary Council. Such a move would allow the IRGC to bargain with the military and the rest of the government in the resulting transitional governance, over its future roles. This action would also preserve the income and fiefdom of much of the IRGC bureaucracy, while sacrificing few offenders to appease the students. For the IRGC, this is the most favorable outcome in a regime change, thus highly likely to occur. The Revolutionary Council may anticipate this and counter-move by purging the IRGC, but that would weaken their protection and force the Council to accept a compromise with the students.

Given that we in the public rarely hear about the bureaucratic machinations in Iran, it is unlikely for us to confirm any of these scenario until the last moment. For everyone's sake, I hope the Revolutionary Council compromises with the students through a constitutional convention, but there are too many entrenched interests in the IRGC to hope otherwise. The IRGC will probably survive in some form in the end, hopefully with more checks on its power. For the US we need to keep up the war rhetoric and nuclear confrontation all the way to the end, but ready to detente at the earliest opportunity.

On Presence Patrols (& Movements to Contact)

Tonight President Obama will give a policy speech on Afghanistan. Hopefully it will give us some real strategic direction. However, before we get to the strategic level, we need to remember that the US military itself has major tactical deficiencies. One such area is the confusion over presence patrols and movements to contact. Many small unit leaders do not appear to understand how and why they are conducting these missions. Hopefully this article helps our squad and platoon leaders accomplish these missions.
In John T Reed's review of Craig Mullaney's Unforgiving Minute, he pointed out Mullaney's ignorance on presence patrols and movements to contact. This is sad, but unsurprising. I have talked earlier about the Army's tactical deficiencies at the small unit level. The Army officer basic course common core (which all basic courses cover) touches upon tactics, but only as slogans. There is a section on the "Military Decision Making Process", which is a battalion+ level staff planning procedure. The field grade officers have made MDMP the holy grail of tactics in OBC, even though it is just a process and inapplicable at the company level. Mullaney went to Afghanistan in 2003. I hope we're better at it today.
Incidentally, when I looked up Presence Patrol on the Small Wars Journal, I found the discussion "What is Prescence Patrolling?", started five days ago. That is a sad sign for this anti-intellectual Army.
Looking at the Mullaney's description on the Presence Patrol, and on the Small Wars Journal, people seem to think that it is an information operation technique, where you show the flag and remind everybody of your presence. This is an unfortunate legacy from the Cold War, where the US Navy did "Presence Patrols" and coined the phrase. That cultural connotation has carried over into Army operations. However, the Navy Freedom of Navigation and Presence patrols took place in an uncluttered environment, relatively devoid of civilians. The intended target, other navies, were bound by peacetime rules of engagement. The patrols aimed to reinforce existing attitudes, not to change them.
On the other hand, in today's War Amongst the People, ground presence patrols operates on the human terrain. Showing the flag to the population has little effect on hearts and minds. Especially when the Yanks go back to base at the end of the patrol, while the Taliban maintains a permanent presence, as is the current practice in theater. Therefore, these patrols do not accomplish their IO mission, but rather present well-scheduled targets to Taliban IEDs and ambushers.
Therefore, we need to rethink presence patrols and make it militarily useful to the small unit. To the small unit (Company and below), the presence patrol has two purposes: To gather intelligence from the population, and to disrupt enemy Tactical Assembly Area activities.
1. Gather Intelligence
The fact that the Taliban can mount attacks means that we do not know who the enemy is, especially at the small unit level. The presence patrol is the primary intelligence tool available to the small unit leader. You need to keep talking to the locals and finding out what's going on. Just as all operations start with a map reconnaissance, you need to start with a map of the human terrain: Who are the village leaders? Who is related to whom? What blood feuds are in place? Etc.
One of the biggest innovations over the past 8 years, at the small unit level, is the Company Intelligence Cell. As we are doing more distributed operations than ever, and as we fight amongst the people, it is absolutely critical that all "Battlespace-Owning" companies have their own intel cells. These intel cells organize intel and analyzes trends. Regarding War Amongst the People, your intel cell collates the link diagram of your population, telling you who are hostile, who are possible abetters, and whose support you need. If you haven't head of it, read up on it in the Infantry Magazine and the Small War Journal.
To build and maintain your "model"/link diagram of the population, you need to get out there and talk to people, get the latest gossip. If the locals won't talk to you, then you need to build relationships with them. Start with "Hello"s and go on from there. Start a business relationship by hiring a few day laborers to work on your outpost, pick up trash on the surrounding roads, etc. A business relationship is a perfect cover to start talking. Once you know the Who's Whos, then you have a starting point to get to the suspects.
2. Disrupt the Enemy
Of less military utility, but still important, is Disrupting Enemy TAA activities. Just like you, the enemy needs a secure Tactical Assembly Area to plan ops, rehearse actions on the objective, and do pre-combat inspections. If you are patrolling an area, you deny the enemy the availability of that area for TAA activities. He has to go elsewhere, away from the cover of the population.
Therefore, your patrol schedule has to be random, and sometimes you should stay the night.
To sum up, you are not doing presence patrols. You are doing reconnaissance patrols, reconning on the population as opposed to the terrain.
On the subject of "Movements to Contact", you should never just go from one point to another, waiting to get hit. You will always know where the potential ambush sites are, even from a simple map recon. You can then do things like taking detours, clearing enemy Objective Rally Points, etc.

M-4 Carbine Updates

According to Army Times's Matt Cox, the US Army is proposing six changes to the M-4 carbine. The most major among the six are a heavier barrel and a piston gas system. As I discussed in my previous articles, M-4's reliability problems comes from chamber heating, leading to failures to extract. These two changes help to mitigate against that problem.

A heavier barrel will increase the heat capacity of the barrel by adding mass, ie, more heat energy is required to raise the temperature by one degree. Therefore, the new M-4 will fire more shots before the chamber heats up to extraction failures.

A piston gas system gives a sharper tap on the bullet case during extraction, compared to the current gas-impingement design. That higher transient force may be enough to overcome the case "sticking" to the heated chamber, further improving reliability.

So these changes are a good fix to the M-4. However, we still have the problem of excessive heating. The fixes only postpones the inevitable. I wish the Army would go to the root of the problem and either 1) slap a cooling fin/heat sink on the barrel nut, or 2) go to a longer barrel (16 - 20 inch) that the 5.56mm round was designed for.

Hat tip: the Firearm Blog.

PS: Added links and tags.

Fort Hood and the Second Amendment

I've been reflecting upon the Fort Hood massacre and the Second Amendment. As many of you know by now, military bases, like all federal facilities, are gun-free zones. They strictly regulate personal weapons, and concealed carry is prohibited. Doubtlessly, a soldier with a weapon would have disrupted MAJ Hasan's killings. In general, soldiers allowed to carry personal weapons will make terrorist attacks more difficult [against the military].

At the same time, the military regulation of personal weapons came from past experiences. There are many young, immature, and passionate men in the armed forces, who are very likely to shoot each other in a moment of passion, if they have a gun at hand. The challenge here is to reconcile the needs of force protection against good order and discipline.

It is eminently sensible, then, to allow a limited conceal-carry scheme in our military. Specifically, commanders (O-5 and above) can give their officers and non-commissioned officers license to carry their own weapons in garrison, and perhaps on liberty. Officers and NCOs are [hopefully] more mature than the rank and file. Traditionally, officers have sidearms to enforce discipline, so this policy is a natural continuation. Moreover, officers are to look out for the welfare of their subordinates, making concealed carry a logical extension of that duty. Being at the commander's discretion, this licensing scheme allows commanders to apply their judgement. If a licensed individual is at psychological risk, his commander has the right to revoke the license and place him under observation.

In the field and on deployment, soldiers are issued weapons, so they do not need to carry personal weapons. Personal weapons at war may also complicate the Laws of Warfare.

Of course, today's military, as John T Reed reminds us, is a micro-managing institution that fears the concept of accountability. Even if the generals were willing to delegate such a responsibility, their JAG lawyers will probably talk them out of it. I cannot see us implementing this policy any time soon.

Afghan Auxiliaries in the Making

Here are two encouraging pieces of news from Afghanistan:

1.) Danger Room reports that the Coalition is paying villagers to maintain militias, somewhat similar in concept to the Sons of Iraq in OIF and the Strategic Hamlet Program of Vietnam. Not everyone is onboard with the idea, of course. http://www.wired.com/dangerroom/2009/11/us-to-afghan-militias-dont-throw-away-your-guns/

2.) Danger Room also reports that the Coalition will hire some Afghans to man the base security for some FOBs. This one sounds like it came from a Good Idea Fairy, and has the potential to end very badly. On the other hand, this could be the manifestation of a treaty between the base commander and the local chieftain. http://www.wired.com/dangerroom/2009/11/us-turns-to-local-guns-for-hire-to-guard-afghan-outpost/

These two pieces show that the Coalition is building up security from the local level, arming villagers to defend themselves and paying sub-warlords to maintain their armies. In a previous article I said that the Coalition was failing to learn their lessons from Iraq. That the Coalition is now building up Afghan militias, shows that they are implementing some lessons, at least. http://americanmohist.blogspot.com/2009/10/india-afghanistan-somalia-staying-ahead.html

There has been some arguments in the public domain, saying that we need to give money directly to the Afghan provinces, rather than Karzai's central government, following the Afghan election disputes. That's good news, especially since some of the advocates were American political appointees. We are moving strategically away from the Westphalian paradigm by focusing on local, rather than national, governance. However, we can't bypass the Karzai administration completely, as he appointed the governors, who presumably return the favor by tributes and political supports.

In any event, we are taking baby steps to recognize the non-Westphalian realities on the ground, which is that people only have loyalty to their own tribes/villages in Afghanistan. However, we will continue to fail in Afghanistan until all parts of the Coalition comes to accept this paradigm change (yes, I'm looking at you, State Dept.) The German soldier quoted in Nathan Hodges' article clearly needs a paradigm shift as well.