Archive for March, 2013

The All-Night King of the Capital

Wednesday, March 27th, 2013

On March 13, before heading to Capitol Hill to talk deficit reduction with House Republicans, President Barack Obama, as is his custom before such showdowns, met with his economic team, including National Economic Council head Gene Sperling. The NEC, a Clinton-era innovation, is supposed to serve as an organizing body for the government’s other economic agencies, like Treasury and the budget office. In the hands of Sperling, who worked at the NEC at its inception and has been its director for longer than anyone else, the council has become half think tank, half coach’s corner. Sperling and his team of wonks find economic policies, incubate them, game them out, and present them to the president.

This has made Sperling a ubiquitous figure in the economic policy debates and fiscal crises of recent years. Sperling is the one prepping the president for TV appearances. He’s often dispatched to brief congressional Democrats, as well as the chief policy staffer for Republican House Speaker John Boehner, on the White House line. During the fiscal cliff talks, Vice President Joe Biden was accompanied on his forays to the Senate by Sperling, the human cheat sheet. The only times he hasn’t been in the room is when it was just Obama and House Speaker John Boehner.

It’s an unexpected turn, given that Sperling barely made it into the administration in the first place. A veteran of Bill Clinton’s team from the campaign days in Little Rock, Sperling had worked on Hillary Clinton’s presidential run, and when Obama won, Sperling was left without a job in the administration. Larry Summers, an old friend and colleague, was named head of the NEC, and he urged Timothy Geithner, the new treasury secretary, to find Sperling a position. Geithner made him a counselor. For someone with Sperling’s experience, it was, at best, a bit part.

When he started at Treasury, Sperling was temporarily given a suite that had once served as Andrew Johnson’s Oval Office during the months that it took Mary Todd Lincoln to move out of the White House. It was the peak of the financial crisis and Sperling’s deputies slept on the 150-year-old couches. One Saturday morning, an informal tour stumbled upon Sperling and his team cranking out a PowerPoint presentation amidst the flotsam of an all-nighter. “This is a historic office!” the guide exclaimed. “Well, it’s a historic crisis,” Sperling reportedly shot back.

This kind of behavior didn’t immediately endear him to his new bosses. Obama’s inner circle is obsessively orderly. Sperling, as Clintonian as they come, is rambling and intensely inefficient. He is compulsively late; meetings that were scheduled to run for half an hour go three times longer. (“The unit of productivity per unit of work is probably lower” than the ideal, a former staffer told me.) “Gene kind of fit in more on Clinton time,” says a onetime colleague. “This ‘you better be on time’ or ‘the meeting’s going to end in fifteen minutes’ kind of shop is not quite as aligned with his demeanor.” The colleague adds, “It took the Obama people a while to warm up to him.”

But Sperling made himself indispensable, mostly by never going away. “He was constantly over in the West Wing. He hustled,” says Peter Orszag, Obama’s first budget director. “If there wasn’t a spare desk at the White House, he would just sit on the floor and work,” recalls Bob Greenstein, who runs the Center on Budget and Policy Priorities. “He either didn’t have pride or swallowed his pride and took it on, but … Gene started to become one of the central players even without having the portfolio to be one.”

At Treasury, Sperling pushed progressive policies that, in the middle of a nine-alarm financial meltdown, were not high on the list of priorities. He pushed anyway, “in his usual, relentless way,” says Geithner.

“Gene was holding ten p.m. calls every night on executive compensation at a time when most people were worried, is the financial system going to fail?” says one former staffer. It made Sperling the target of some derision, but he got his way. One of his pet causes became the Small Business Jobs Act, a combination of tax cuts and loans for small enterprises, which Obama signed into law in 2010. In 2009, he also proposed two measures to regulate how companies pay their executives. The extension of unemployment benefits in 2010 was Sperling’s doing. And the American Jobs Act of 2011 (which would have provided relief for Americans hit hardest by the crisis but which ultimately failed to clear Congress) was all Sperling, says Geithner. “He really was the main architect of the American Jobs Act,” Geithner explains. “It was big, and it was designed very creatively.” “Gene was prescient,” says the staffer. “You look back and you say, ‘Geez, this is stuff we’re still getting hammered on, and, were it not for Gene, we would be in a way worse place.’”

Most of the stars of Obama’s founding economic team have now departed, but Sperling is still there. He has managed to outlast them by, well, outlasting them. During the 2008 transition, Summers recalls haggling with Sperling over a tuition tax credit in the planned stimulus package. Sperling wanted to make the credit refundable, while Summers, the man with the real job in theadministration, disagreed: There were simply too many refundable tax credits already. “It was ten at night, and he wouldn’t let me leave!” says Summers.

After over an hour of arguing, Summers declared his decision final and went home. Sperling stayed late into the night drafting the memo that would recommend the best policy to the president. By the time Summers came in the next morning, the tax credit had become refundable. Geithner remembers a furious Summers calling to demand that he rein in his counselor. “‘It’s just unfair, he stays up later!’” Geithner recalls Summers saying. “He would just outlast everybody; he would just fight harder, longer. He just wore everybody down.” (Then–Chief of Staff Rahm Emanuel had to take Sperling aside to remind him that economic policy isn’t made by staying awake the longest.) “He has an awesome tenacity advocating for people who are vulnerable,” Summers told me. “It’s frustrating for lesser mortals.”

The overwhelming power of this political bulldozer is folded, rather messily, into a five-foot-five frame, with graying hair and a receding hairline. It’s hard to quote Sperling, because he rarely finishes a sentence, or even a clause. His is not one of those brains that produces speech in essayistic paragraphs or recounts events in chronological order. There’s a disarming and goofy informality about him. I arrived for our interview on time—“That was silly of you,” said the West Wing receptionist—and about an hour later, was ushered in to meet Sperling, who was pacing in and out of his office and joshing with his mostly male staffers.

In the boyish world of economic policy, his quirks have made him the target of elaborate pranks. Geithner once sent a friend, posing as a Government Accountability Office inspector, to Sperling’s Treasury office to tell his assistant that the gigantic conference table he used for his crowded, marathon brainstorming sessions was too big and didn’t meet government specifications.

Yet Sperling has also earned his colleagues’ respect, because, as odd as it sounds to say this in Washington, a big part of his drive comes from the fact that he truly believes he is making the world a more just place. Born to a progressive family in Ann Arbor—his father was a lawyer who won several constitutional cases; his mother was an education reformer—Sperling says it was instilled in him that Jews, as people who were once oppressed, had an obligation to ease the burden of others. “He’s clearly attracted to power, to being part of that big process,” says a colleague from the Clinton years. “But a lot of people get inside the room and forget what it’s like outside the room, and he’s never forgotten.” Bob Woodward, in his book on Clinton’s presidency, The Agenda, describes Sperling, then–NEC deputy director, thanking his staff for helping preserve Clinton’s progressive policies during the brutal 1993 budget negotiations. He described the millions of working poor who would be lifted above the poverty line and the millions of children who would get hunger relief. Woodward noted, “Tears came to some eyes.”

But Sperling also thrives on the gritty business of policy-making. He recounts battles over budget line items like a kid telling a spooky story, flashlight propped under his chin. One episode in which his relentlessness paid off came in 1997, during a showdown with Newt Gingrich. Basically, knowing that Gingrich would have a limited appetite for tax credits for the working poor, Sperling and his NEC team figured out a way to combine a child tax credit with the earned income tax credit, boosting the amount of money eligible families would receive. Unfortunately, Gingrich caught on and Erskine Bowles, then the White House chief of staff, was sent to repair the damage. He came back with a counteroffer from Gingrich limiting the stacking of the tax credits. Sperling, armed with a sheaf of charts detailing the impact of every possible outcome, protested: It was going to take serious money out of millions of pockets. Bowles pleaded with him not to scuttle the whole deal over a single policy initiative. But Sperling held the line, and Gingrich, infuriated, walked out. Later, however, he sent over some autographed copies of his latest book, and the two sides started talking again. In the end, Sperling and the working poor got their stackable credits. “Whether you’ve prepared enough to know the impact of every detail and potential option can make the difference between whether you’ve used your spot at the table to help or let down millions of people who are relying on you to look out for them,” Sperling told me.

Back then, Sperling was able to work with Gingrich and the House GOP, even when they bitterly disagreed. During the 1997 budget clashes, Sperling sparred constantly with then–House Budget Committee Chairman John Kasich. But after Kasich became governor of Ohio in 2011, he could still call up Sperling, who, with help from Valerie Jarrett, was able to find a way to help Ohio expand Medicaid. “I do not support Obamacare, but I do support the expansion of Medicaid. I wanted to get it done but not under these conditions,” Kasich told me. “We have the same goal. Once you make up your mind that you want to reach a goal, you think of ways to get there.”

Stories like these are rare. Washington and the Republican Party have changed, and Sperling now finds himself dealing with an opponent who cannot be exhausted into submission. During the fiscal cliff talks, Sperling was amazed that House Republicans never made it to the stage of negotiations when both parties, in their best dramatic bargaining voices, announced their final offers, take it or leave it. Instead, the House Republicans just walked away. Here he reprises his familiar joke about Boehner and Eric Cantor: “I wouldn’t want to date them,” Sperling says. “Because they don’t say, ‘Can we talk?’ They don’t say, ‘Can we take a break? Can we see other people? Can we go to a therapist?’ They’re just gone one day!” The only explanation he can come up with is that Republicans don’t want any deal at all, and they never make a final offer for fear that Democrats might actually take it.

Now, Sperling senses a spitefulness within the GOP that wasn’t there even with his arch nemesis, Gingrich. Newt was mean, but he could count votes and he could deliver. He was also willing to work with Democrats on the less flashy stuff. He was vicious in the big fights, yet there were feel-good bipartisan measures, like a veterans’ tax credit, on which they could collaborate. There’s a bemused sense around Sperling’s office that, if Barack Obama is for chocolate cake, the Republicans would be against chocolate cake, too.

It’s all harder these days. Sperling has married and had kids; at 54, the all-nighters take a toll. And, while he may have successfully browbeaten his way to power, he has never truly made it into Obama’s inner circle, the hallowed, tiny space still reserved for political gurus, Chicagoans, and those from the long march of the 2008 campaign. “It definitely bothers him,” says the former colleague.

Still, Sperling has not yet tired of pushing the budgetary rock up the mountain. The fact that he has been able to win before allows him to believe that he might be able to win again. “It would be hard for me to come in every day and work really hard if I weren’t an optimist,” he says. Besides, he is too busy looking for openings and doggedly ramming fixes through to have time to fall into the subjunctive progressive whine: if only. “I feel like, yes, I’d like to be six-one and twenty-six and start for the Pistons, too, but those things aren’t going to happen, and this is the world we live in,” he says brightly. “Sometimes you get up the hill, sometimes you don’t. But you always keep pushing.”

The All-Night King of the Capital [TNR]

Saving Cyprustan: How Russia Sees Cyprus

Sunday, March 24th, 2013

The day that Cyprus rejected a European bailout that would have given every bank account in the country a “haircut,” the Cypriot finance minister Michael Sarris went on a mission. He went not to Brussels or Berlin, however, but to Moscow. Sarris had to find $7.5 billion dollars to cover the gap between the $12.5 billion the Eurozone was going to give Cyprus—the Europeans and IMF insisted the loan be capped at 10 billion Euros— and the $20 billion that the Cypriots needed to plug the hole in their economy. Flying to wealthy, flashy Moscow, which, as we’ve all heard, has oodles of money in Cyprus, though no one knows exactly how much, was a predictable move, like calling your spendthrift millionaire friend when you can’t make your rent this month.

So Sarris showed up in Moscow, but not hat in hand, exactly. He came offering stakes in Cypriot telecom companies and in its recently discovered offshore gas reserves— reserves which Gazprom was reportedly eying in a potential private bailout. And yet, on Friday, the three-day talks with Russian Finance Minister Anton Siluanov and Dmitry Medvedev—who is said to have audibly cheered in a meeting when he saw the news that Cypriots had rejected the Euro bailout–ended with little to show for the effort. Medvedev said he wasn’t shutting the door on bailing out Cyprus with help from Europe, but Sarris went home to a ticking clock, empty-handed.

It’s not clear why Moscow didn’t bite, but all of this exposes a very interesting geopolitical situation. Russians are said to have up to $32 billion in Cypriot banks, which is not insignificant for a country with a $25 billion GDP. But don’t quote me on that Russian number. Asked by a Russian paper how much Russian money was in Cyprus, the head of the Cypriot Central Bank said, “depends on how you count it.” This is in part because it’s very easy for Russians to acquire residency as well as to register off-shore or shell companies on the island. Often, however, they are registered to a local lawyer, so the company is technically Cypriot, but stuffed with Russian cash.

Cyprus is often talked about as a money laundromat for ill-gotten Russian money, and as a tax shelter, but the more accurate description is probably “haven.” Some of Russia’s wealthiest tycoons have money stashed in Cyprus, but so do people from the humble ranks of Russia’s many, many millionaires, not to mention droves of the merely upper-middle class. (The big dogs have their money all over the world—Isle of Man, Switzerland, London real estate, the Cayman Islands—but Cyprus is the starter haven, the gateway to the world of offshore accounts.) The reason, as former Russian finance minister Alexei Kudrin explained, is simple: Cyprus was once an English colony, which means that it has English law, which the Russians revere for its ability to fairly settle business disputes. Not only is Cyprus an Orthodox Christian country, with an alphabet from which Cyrillic was derived, it is also a place with rule of law and a functioning, independent court system. Russians do not have this at home, where money or property can be yours one day, and someone else’s the next, without any legal recourse. So yes, money gets laundered in Cyprus, but money is also kept safe there from other Russians, specifically those working in the Russian government.

And that’s where it gets crazy: on Thursday, Medvdev said that unnamed “government structures” have their funds in Cyprus. Which explains Russian President Putin’s outburst when the European plan was first announced: Putin, the man who jails dissidents and on whose watch corruption and government extortion of businesses has reached near mythical levels, called the Cypriot bank tax “unfair.” But not really. How does one explain to the average foreigner that the Russian government is sheltering its money…from the Russian government?

It’s worth noting here that Russians generally don’t see their government as a ruling body and neutral arbiter, or as a guarantor of the rule of law. Russians, correctly, see their government as a collection of front-row seats to the auction divvying up Russia’s natural plenty. In the last decade, government bureaucrats have become the country’s new elite. Their expenditures on houses, cars, or watches rarely match their official incomes. Over the summer, for example, a Moscow real estate company found that over half of the luxury flats in Moscow—those priced at $2 million and up—were purchased by government officials. It’s no surprise then, that when Russians are asked about corruption, they are not so much infuriated as envious: polls repeatedly find that a majority of Russians simply want to get into a government post to get access to the goodies.

And once you get those goodies, you must hide them in a place where other people in the government—say, overzealous fire marshals—can’t get at them.

But the Russian government itself owns a lot of businesses, like VTB Bank—where Kudrin, until recently, served as chairman of the board—that, in turn, does a lot of business in Cyprus. VTB is one of Russia’s largest banks and it is mostly owned by the Russian government. Which makes some of its transactions seem rather strange indeed. For example, Alexey Navalny, an opposition politician, uncovered one such scheme: VTB decided that it could make some money renting oil drilling equipment it purchased from China. VTB did not purchase them directly, but through a Cypriot company, registered to two Russians, which bought and sold them to VTB at a 50 percent markup, and pocketed the difference: $150 million. (The point was for the Cypriot company to make the $150 million, rather than the rental of the drilling equipment, which is lying unused in some forsaken field in Siberia.)

To the Russians, Cyprus has become a kind of Mediterranean Russian colony. There are Russian storefronts, nearly 50,000 Russian residents, and many more vacationers from the Russian middle class. Cyprus has become wildly dependent not on Europe, whose currency it uses, but on Russia. It’s a particularly ironic twist given that Russia, historically, has seen itself as the Third Rome, the Orthodox power that picked up the flag that Byzantium dropped when it was conquered by the Turks. Perhaps it is because of this that the Europeans, particularly the Germans, pushed for the Cypriots to pay for part of their own bailout. Greeks are one thing, but Russians—whom Europe sees as the barbarians at the gate, aping its fashions and customs—are another, and Germany sees no reason why a country that turns off its gas supply to punish Ukraine, should be bailed out by German taxpayers.

The real question in the Cyprus debacle is why Russia is being so careful. You’d think Moscow would be happy to rush in and save a small European country that the Continent has snubbed. They already have a colony in the Mediterranean. $7.5 billion would be a cheap price to turn it into an ally.

Saving Cyprustan [TNR]

Neigh Gourmet

Monday, March 4th, 2013

I’m just going to come out and say it: I love horsemeat. It’s lean, yet tender, it is flavorful but not gamy; it’s delicious. Those IKEA meatball-eaters have no idea how lucky they are.

I was first introduced to it in the Uzbek restaurants of Moscow, where they serve kazy, the horse sausage eaten across Central Asia, with translucently sliced onions and warm, naan-like bread. I was skeptical at first, but eating kazy is a conversion, that first moment of doubt melting away into a long “mmmmm” as you chew. But this was no mere staple of exotic Central Asia. By the time I got to Zurich, I was totally ready for the horse steak my hosts ordered for me. For the sake of comparison, we got one steak steak and one horse steak, and both slabs of raw meat came out on hot stones that sizzled and cooked the meat to the degree you wanted. And you know what? It wasn’t even a contest. Compared to the sweet richness of the horse, the cow tasted bland and dry. If I ever come across horse on a menu again, I would order it: I still crave that horse steak.

And that’s just the flavor part. Horsemeat is healthier than beef or other red meats: it is less fatty, and, unlike its more socially acceptable counterparts, less doped up with hormones and, likely, raised in better, less crowded, and more sanitary conditions. It’s rich in vitamin B12, which is key to blood production and the healthy functioning of the nervous system. “If someone were anemic, horsemeat might be a good way to get iron into that person’s system,” says LeeAnn Weintraub, a Los Angeles dietician. “You’re still getting the iron without all the saturated fat of other commercially raised meats.”

Yet much of the West is having a freak-out over the appearance of horsemeat in dishes like Taco Bell tacos, things that we probably assumed were made of meat far baser, if we assumed they were made of meat at all. Moreover, why are producers pulling these products off the shelves, as if they were found to contain plutonium or, worse, rat?

To someone who has spent time living in Russia, this may smack of the pampered squeamishness of the West. The aversion, however, has far deeper roots.

Horses, both wild and domesticated, have been an important source of protein for ages, especially in Central Asia, where they teemed on the steppes. It was a different story in Europe, where horses were scarce by comparison (this was one of the reasons that menaces like Attila the Hun, galloping in from the steppe, were such a potent threat). The early Christians, clustered around the Mediterranean, ate fish and lamb. Horseflesh they associated with the heathen savages, the Teutons who lived in the forests beyond the reach of Rome and were known to eat horse. In 732, Pope Gregory III declared the practice of eating horsemeat unclean and unchristian. This was not a hard edict to abide by: The forests were far better for raising pigs, and the European grasslands for ruminants, like cows. Horses were treasured work animals too expensive to eat, who would end up on the plate when they were too old for any other purpose.

In the modern era, horses became the meat of Europe’s underbelly, the meat of the hungry. Napoleon’s starving troops were infamously instructed to eat horse on their campaigns. In 1866, French authorities legalized the production and sale of horsemeat as a way to get protein to the malnourished working classes, but this was a controversial and very classist move: the wealthy, for whom horses were not just transport but pets with names and personalities, found this to be a deeply repugnant practice. It was considered a basse viand, a base meat. Not because of how it tasted, but because of who ate it and who had the luxury to pamper it. (Horsemeat, by the way, is still eaten in France, even if it is not nearly as popular as other meats—or even, ironically, snails.)

But the Anglo-Saxon tradition, of which we are the heirs, is different, and here’s where the French come in. The Anglo-Saxons may have eaten horse when Pope Gregory was fretting about their paganism, but when the Normans conquered them, in 1066 a certain gastronomic duality entered the lexicon, a cognitive dissonance made flesh. The Normans are responsible for introducing much of the French that today floats around the English language, especially when it comes to food. When one spoke of food, one spoke in the language of the French conquerors, rather than the language of the Anglo-Saxon hoi polloi. (Or, as it was then known, Angle-ish.) And so we came to eat not cow, but beef (boeuf), not pig, but pork (porc), not lamb, but mutton (mouton), not calf, but veal (veau). It is a pretension and a prudishness that we have internalized and unconsciously propagate to this day.

The next layer, of course, is the Angle-ish obsession with the horse as a noble beast, a beast that bears us into battle and a beast we bet on and cheer in derbies. (Why it’s okay to race these horses and then euthanize them when they break a knee, but not eat them is, frankly, beyond me.) Unlike their counterparts elsewhere, American girls dream of ponies, and if they grow up swaddled in money and privilege, like Georgina Bloomberg, they can live the fantasy of every other young woman who shops for the equestrian look at J. Crew. Horses are the stuff of myths and dreams in America, and, because we’re not hungry, we have the luxury of adding them to the list of animals we are too guilty to eat, foie gras, veal, rabbit. One friend of mine, for instance, loved burgers but could not, for the life of him, eat duck. It was too cute, he said.

For some reason, non-vegetarian Americans can live with this nonsensical ethical code. Cows, chickens, pigs—we feast on their flesh without wincing or imagining them marching into the slaughterhouse, their lives racing before their big, dumb eyes. But tell them that there may be some horse in their dead cow patty, and you get theatrical retching and indignation. In part, it is deep-seated historical and cultural taboo going back centuries. But in part, perhaps mostly, it is because we are spoiled: we are spoiled to not only have the option of eating meat on a daily basis—unheard of before the 20th century—we can pick and choose. And we’re sated enough to have animals as pets, as sacred companions whom we feed with meat, placing them in a strange plane above other animals.

More news is sure to break in the coming days and weeks about horse meat found in this or that product, and it would be nice if, just for a minute, we recognized that it is simply the flesh of one dead animal mixed in with the flesh of another dead animal, and that it is by cultural coincidence that we prize one over the other, and that we do it because we are so supremely, absurdly sated. It would also be nice if we realized that having some horsemeat in those tacos might not be such a bad thing. It might even be the best thing in there.

Neigh Gourmet [TNR]