The gaff that keeps on giving

Ever since John Marshall established the principle of judicial review in Marbury v. Madison, bodies entrusted with these powers have locked horns with executives. It should come as no surprise, then, that Michelle Bachelet has had some difficult encounters with Chile’s Constitutional Tribunal, including a tussle over the government’s plans to make birth control pills available at public clinics. But the latest encounter is particularly damaging.

Since it implementation in February, 2006, the revamped public transportation system in Santiago has been the Bachelet government’s Achilles Heel, costing the government tens of millions of dollars a month, while public opinion claims not to notice a substantial improvement in service (indeed, the number of those with a negative opinion of the system has increased). Faced with bankrupting Transantiago, the government sought funding in Congress but was unable to garner enough votes. It then obtained a U$400 million loan from the Inter-American Development Bank. But this week the Constitutional Tribunal declared the loan unconstitutional. As if that weren’t bad enough, the government is threatening to use its weapon of last resort – the 2% of the budget the constitution permits for spending on ‘catastrophic events’. Of course, declaring Transantiago a catastrophe is a public relations nightmare, but options are becoming scarce. Without Congress’ cooperation, funding runs out in two weeks. Opposition critics are demanding the abandonment of the plan altogether and a total redesign.

Transantiago has already become a symbol of technical incompetence, opening the door for opposition claims that government is incapable of offering solutions to problems of public policy. Chile remains a country where many public services, from roads to water to pensions are largely in private hands, and although Michelle Bachelet has had some success in areas such as health care and pensions, Transantiago gives a strong boost to the neoliberal argument. For President Bachelet’s progressive agenda, this is the legacy of Transantiago.

That is the public policy problem. But there is a political problem as well. This week former president Ricardo Lagos, who insists he does not want to run for president but who is making more and more public appearances, lashed out at Bachelet, saying that “One responsibility is the plan’s design, which all the international authorities applaud… but the way in which it was implemented, or implemented ahead of time, is not my responsibility.” In other words, he handed over an internationally-approved plan and Bachelet messed it up. Vote for Lagos, he’ll fix it.

What lies behind this extraordinarily ungraceful outburst? Probably the publication of a poll earlier in August in which 32 percent of those polled blamed the previous administration for Transantiago, whereas only 25 percent blamed Bachelet. What Lagos did not say is that although the government’s current subsidization of Santiago’s public transportation system was not written into the original plan, it is the rule rather than the exception. Although the government claims that one of the principal funding problems that Transantiago is that too many riders are not paying their fares, research shows that most public transportation systems around the world are not, in fact, financed entirely by what riders pay. In the US, fares cover anywhere from 13% of total operating costs (Detroit) to 67% (New York’s subway), with most in the 30 to 50 percent range. Whatever the implementation problems Ricardo Lagos wishes to concentrate on, it appears that in addition to routes and technology, not admitting that subsidization was going to be necessary was a design flaw as well.

Palin

OK. So he's not senile. He knew exactly what he was doing -- or rather, the faceless powers behind the party knew exactly what they were doing. She's there for the base, and she's perfect for them: angry and condescending, just like them.

Is he senile?

What this shows is not that Sarah Palin is not suited to be Vice President, but that John McCain is not suited to be dog catcher.

Non-events

Watching CNN these last few days is like watching fish flopping on a beach, gasping for air (or water?). They were all geared up for the Republican National Convention, but then it was quasi-cancelled becuase of Hurricaine Gustav. So they all donned their rain gear and headed down to New Orleans to film the next disaster to hit the city, but the storm took a left turn at the last minute and there wasn't much death and destruction to film. So no RNC, no Gustav, no story.

Classic moment of the day, when a reporter asked a mother why, having not evacuated for Katrina, they decided to evacuate now. Brilliant reporting.

Of course, the other non-story is that the Republicans got away with murder, not having to a) showcase the dismal speaker that is McCain and opening him up to comparisons with the silver tongued lawyer from Chicago, and b) not having to showcase McCain together with Bush. They can turn the convention into a Hurricaine relief telethon and go home. Lucky.

Obama

I watched the Obama convention speech here in the US. It was quite a performance, and showed that words matter. Yes, the guy can talk. But the point is that it's how you talk, what you say, how you organize your thoughts and communicate them, that says an awful lot about what's goin on upstairs.

So he's not just an articulate lawyer. The guy is very, very smart.

The costs of good behaviour

The numbers are not particularly encouraging. Inflation is nearing double digits, growth forecasts are revised downwards, the Central Bank complains of upward pressure on interest rates, unemployment is creeping up, and the political mood is ugly. The economist Felipe Larrain, a Piñera advisor, denies that Chile is in crisis. He calls the situation “delicate”. Given this delicacy, there is no more talk of external vs domestic causes. In the context of next month’s presentation of the 2009 budget to Congress, politics has come into it, and politics, as we know, are local.

Now that politics has come into it, one would think that Finance Minister Velasco – not affiliated with any political party, and naturally disinclined to playing politics – would have an easy time of it. However, while the economic scenario is complicated, the stars have conspired to hand him the most favourable political hand that he has had since coming to office. He has remained totally loyal to the president, and the president has returned the favour. The president probably recognises that, far from being the intransigent technocrat that many make him out to be, Velasco has shown quite a bit of flexibility, giving in in a few key areas, such as the injection of additional funds into the Fuel Stabilisation Fund and a funding feud with the Supreme Court, while keeping public spending within reasonable margins. In fact, despite all the rhetoric of social spending, public spending as a percentage of GDP started to fall in 2008, after peaking the year before, and is projected to fall further in 2009. In this regard President Bachelet should be given credit for allowing Velasco to resist the political pressures (while also allowing him to take quite a bit of the political flak). President Bachelet does not get credit for much these days, but it should be recognized that she has kept her cool with respect to the finance minister.

There remain important pressures on spending, not the least of which is the still un-resolved problem of the badly misdesigned reform of Santiago’s public transportation system, which requires roughly 40 million dollars a month just to cover its operating deficit and to keep it functioning at its current – and still far from optimal – level. And there are unspoken pressures which remain unaddressed, such as a long term plan to solve the country’s energy needs – probably Chile’s greatest long-term public policy challenge. Yet today, few, except for political outliers like Senator Zaldívar, call for the finance minister to be sacked. With the municipal elections later this year, and the 2009 presidential race already very much on people’s minds, the Concertación is mindful of the 1999 campaign – the last time a presidential election was fought in the midst of an economic downturn. That time, Joaquin Lavin came very close to taking the presidency, and for all their differences, Concertación leaders are united in wanting to avoid an Alianza victory next year. So in current budget negotiations, Velasco will at least be able to count on a bit of breathing room from his own coalition – something he has not really enjoyed before.

All of which combine in the oddest possible way: a Latin American government, not exactly smashing the opposition in public opinion polls, rich in fiscal resources, but unable and even unwilling to spend in an election year. Will Chilean voters respond to all this good behaviour?

Super Tuesday

The results of Tuesdays primaries in the US show that the Republicans are already coalescing around a single candidate, while the Democrats cannot seem to be able to make up their minds. Not good.

Clinton is having a rough ride, which is pretty unfair to her. She has done all the homework, while Obama has blown in on a lot of hot air. But it works. He has his finger on the mood of the country, particularly young people. The theme of change seems to be gaining some footing, although it is as meaningless as when Joaquín Lavín used it in 1999. Change for the sake of change accomplishes nothing. Change is important when a) one actually wishes to change the current state of affairs, which clearly Americans desperately want; and b) there is a better alternative on offer.

What's Obama offering?

In the meantime, this is an entertaining way to keep track of what's going on.