Without a doubt, the President has shifted the rhetoric of the previous administration and has thereby changed the international climate.  His speech in Cairo was historic and demonstrated a real desire to make amends with the Muslim world.  He’s showed an unprecedented willingness to sit and talk with historic enemies.  He’s begun a push toward nuclear disarmament which, if successful, would certainly be deserving of a peace prize.  But almost everyone knows that the President hasn’t accomplished anything truly of substance just yet, although many are confident that he in fact will.

In any event, a peace prize at this stage of the game means several things.  It’s demonstrative of strong international support for the President and should increase his clout on the international stage.  In dealing with the challenges posed by the Middle East and North Korea, this can definitely strengthen his hand.  Perhaps the political fallout will even be beneficial to Obama at home, paving the way for him to push through his domestic agenda.  Nobody should underestimate the power of simple popularity.

But I think there’s a good shot that this could backfire for Mr. Obama.  He’s likely to be scrutinized a lot more as people will expect him to live up to his early accomplishment.  And as if Republicans needed any more ammunition to showcase how little the President has accomplished, they are no doubt going to take full advantage of the genuine shock that the win has generated.  If I was President Obama, I’m not sure I’d want this prize just yet.

A friend of mine just told me that there’s an email being circulated at his job that President Obama is receiving the Cy Young award for throwing out the first pitch at the MLB All-Star Game.  I’m pretty sure that SNL is going to have a field day with this whole thing.

There’s a little boy and on his 14th birthday he gets a horse… and everybody in the village says, “How wonderful, the boy got a horse.” And the Zen master says, “We’ll see.” Two years later the boy falls off the horse, breaks his leg, and everyone in the village says, “How terrible.” And the Zen master says, “We’ll see.” Then, a war breaks out and all the young men have to go off and fight … except the boy can’t ’cause his leg’s all messed up.  And everybody in the village says, “How wonderful.” The Zen master says, “We’ll see.”

And on and on it goes.  To add some color to this, I tend to think that the French Revolution is the most consequential event in recent history.  Why?  Well, if it wasn’t for the French Revolution, we wouldn’t have had Napoleon Bonaparate.  And if it wasn’t for Napoleon Bonaparte, we would not have had Napoleon III.  And if it wasn’t for Napoleon III, there may not have been a Franco-Prussian War.  And if it wasn’t for the Franco-Prussian War and its unsustainable peace, France would not have lost the territories of Alsace-Lorraine and there may not have been a World War I.  If it wasn’t for WWI and the crushing defeat and punishment of Germany, Hitler would not have come to power.  And if it wasn’t for Hitler, there would not have been a World War II.  Who knows what the world would look like today if the French didn’t cut off all of those heads almost two and a quarter centuries ago?

The course of history is extraordinarily complex and this is all a bit of an oversimplification.  But I think it’s safe to say that the complete comprehension of potential consequences resulting from such events is beyond human foresight.

“Hitler is defeated! How wonderful!”  We’ll see.  “The Soviet Union is no more!  Communism is defeated!  How wonderful!”  We’ll see.  “Afghanistan and Iraq are flourishing democracies!  How wonderful!”  We’ll see.

In the Sept. 12 decision, Obama imposed a 3-year tariff on Chinese-made tire imports. In the first year, it will be set at 35%, far below the 55% levy recommended by the U.S. International Trade Commission. The second year it will be 30%, and the final year 25%. The tariffs begin in 15 days.

I am sure many Americans will be happy with this decision, since it seems like it will save American jobs.  However, if we look at the issue a little deeper, we find that the tire industry themselves were NOT pushing for this.  I assume this is because the US tire industry owns many of the companies in China making this product.  This was coming from the United Steelworkers union, saying that the Chinese were violating WTO rules by dumping too many tires on the US market.  It looks like this is really an attack on US tire companies moving some production offshore, and the union is fighting them by using the government to slow down the exports.

In reality, this decision is a transfer of money from poor and middle class Americans that will now have to spend more of their money on tires, to the union workers who are getting the new subsidy.  The extra money they would have saved may have gone towards buying other things, but will now be taken by the US government in taxes via the tariffs and the union because they can now sell their expensive tires.

Another question I have is, what if China decided to send us those tires for free?  Would we not accept them to “save American jobs”?  I think that would be a bit silly, why not take free stuff?  So I don’t really see much difference between China sending us these tires at a huge discount vs. sending them to us for free.

Another argument you will hear is that China is a currency manipulator and is artificially keeping their wage rates low.  This follows the above question of “what if China sent us those tires for free?  Don Boudreaux makes a great example of why we should not worry about this issue either:

Suppose you’ve long been exchanging your baby-sitting services with your neighbor in return for his lawn-mowing services.  Each week, approximately three hours that you spend sitting with your neighbor’s brood of brats is repaid by two hours your neighbor spends mowing your lawn.

Then one day your neighbor informs you that he’s about to incur a huge debt to hire a fabulously expensive child psychologist who will quickly teach his children some skills in how to better care for themselves — so your neighbor will now need you to sit with his young’uns only one hour each week rather than three.  But, your neighbor quickly adds, he’ll continue to mow your lawn just as before.

You think to yourself that your neighbor is nuts.  Incurring massive debt to hire a child psychologist who claims to be able to train toddlers to watch over themselves??  You conclude that your neighbor has done himself no favors — indeed, that your neighbor has harmed his family, especially over the long run.  You even worry that, when your neighbor must start repaying this debt, he’ll have less time to mow your lawn in the future.  But being a decent human being, you mind your own business and say very little.

So here’s a question for Seekingexports: Would you be wise, in this situation, to ‘retaliate’ against your neighbor by telling him that, until he restores you to three hours of babysitting weekly, you will limit him to only one hour of mowing your lawn each week?

The above passage illustrates that China manipulating its currency only allows us to buy more of their stuff cheaper.  In other words, they are working harder for us.  Why should we complain if they are willing to do this?  Of course they could raise their prices later on, but we can always rebuild our tire factories and start producing them again.  It’s not like we will forget how to make tires, and clearly the Chinese know that and will keep prices low to avoid this.

In the early 90′s, Paul Krugman wrote an excellent essay on free trade. Now that he is a NY Times blogger, I will not be holding my breath waiting for a post about this decision.  At the end of the day, many people will still buy American tires because of their quality, or because they want to “buy American”.  This is great – everybody should have the freedom to buy whatever tires they desire.  The issue here is now the government, with this decision, is forcing its citizens to pay more for tires to help a special interest group.  To me, this is not the way a free society should operate.

While the Lebanese deserve 95 percent of the credit for this election, 5 percent goes to two U.S. presidents. As more than one Lebanese whispered to me: Without George Bush standing up to the Syrians in 2005 — and forcing them to get out of Lebanon after the Hariri killing — this free election would not have happened. Mr. Bush helped create the space. Power matters. Mr. Obama helped stir the hope. Words also matter.

I think this is a pretty good lesson in foreign policy.  Seemingly contradictory presidencies can actually complement eachother well.  For all of his flaws, it seems fair to say that George Bush’s use of muscle led to some positive changes in the world.  However, the unpopularity of his policies created a vaccum for a president like Barack Obama to fill.  The way I see it, Bush sacrificed America’s popularity to rid the world of certain rogue regimes.  Obama was elected to assuage the negative side-effects of the Bush years and restore America as an example.  This just might be the best of both worlds.

There was a lot of talk during the campaign and in the first few months of Obama’s presidency about how his speeches were nice but lacked any real substance or utility.  While some were skeptical, others were turned off by Obama’s reliance on words that seemed to border on the theatrical.  But if his speech in Cairo last week actually influenced the Lebanese election in the way that it is currently being reported, the skeptics were flat out wrong.  If they make people believe, speeches can truly change the world.

“Mark my words.  It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We’re about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don’t remember anything else I said. Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy.”

For all of his gaffes, Joe Biden just might have been right.  After testing a nuclear bomb underground over the weekend, North Korea has now test-launched two short range missiles, introducing what might be the crisis that Big Joe was referring to.  Of course, the President has not exactly been short on “tests” in his first four months in office.  Afghanistan, Iraq, Pakistan, Iran, and Somali pirates constitute quite the international plateful for a newly elected president. But nuclear tests by whackjob regimes are basically per se global crises.

As of now, the President has limited his response to labeling the North Korean action as “a grave threat.“  While some would have wanted a stronger choice of words, this seems like a sufficient first step.  But, at the end of the day, North Korea is likely not a very big test for President Obama anyway.  The international community is virtually unanimous in its condemnation of Kim Jong Il’s conduct.  Even Mahmoud Ahmadinejad came out and condemned the dictator.  Thus, it’ll likely be easy to get the world to speak in one voice against North Korea and to place sufficient pressure on Kim Jong Il to cease his activity.

Moreover, Kim Jong Il (or Lil’ Kim, as Bill Maher likes to call him) might be the most paranoid person on the planet.  All he cares about is the security of his regime and, arguably, improved conditions for his people (We all know they need it.  Take a look at this image – North Korea is the dark spot sandwiched between South Korea and China).  He has no global ambitions – his interests are purely inward looking and the last thing he would want to do is fire a nuclear weapon.  However, he would love to use the weapon as a bargaining chip for international aid to be pumped into the country.

Of course, it seems like a problematic precedent to legitimize the development of nuclear weapons in return for aid.  But North Korea is an example unique to North Korea.  Considering the country’s limited, perhaps even less threatening, intentions, the President would be wise to engage in the policy of negotiation that both Clinton and (eventually) Bush adopted.  Notwithstanding the extreme unlikelihood that North Korea would actually fire a nuclear weapon, I think we would rather keep the Korean peninsula from going nuclear.  If that goal can be bought with aid, so be it.

The administration could also spin such a result as the product of some of the diplomatic idealism that got Barack Obama elected.