Washington watch

Michèle Flournoy likes to say that during her years at Balliol College, Oxford, she "majored in rowing" and had the shoulders to prove it. Now under-secretary of defence for policy (and known as the brain of the Pentagon) she is using her brawn to muscle through a fundamental shift in US strategic doctrine. Her thinking is based on the concept of the "global commons," which is in turn based on the old Royal Navy idea of promoting maritime supremacy while touting the freedom of the seas. Flournoy sees these global commons in a wider context that includes air and space and cyberspace as well as the oceans. Her essay in the latest issue of Proceedings, published by the US Naval Institute, is becoming required reading around the Pentagon.

She warns that "a series of recent events, including anti-satellite missile tests, piracy in the Gulf of Aden and off the east coast of Africa, and attacks in cyberspace" portend the worst challenge to American security since 1945. And ominously for the US Navy, one of the warning signals cited is a 2006 incident in which a Chinese submarine surfaced within the perimeter of a US carrier strike group. Carriers are meant to be protected from such incursions, so if Flournoy is right about the event's implications this threatens both US Navy doctrine and plans to spend a massive amount of money building ten carriers and their 1,000-plus warplanes over the next three decades. It may also provide ammunition to cost-cutters in Britain's treasury as they eye the Royal Navy's plans for two new carriers.

Though stressing that the US military will maintain its dominance for the foreseeable future, the core of Fournoy's argument is that, in years to come, the real geopolitical battles will be over stability and access to the global commons—which the US will no longer be able to guarantee. Since Fournoy is currently writing the defence department's Quadrennial Defense Review, which lays down strategic doctrine and spending plans for the future, the military, lobbyists, congress are all trying to work out what the article means for them.



One person who should be happy with it is Hillary Clinton, since Fournoy's doctrine states: "Far more than a military matter, stability and security in space and cyberspace will depend on working with our allies and partners to develop a common framework and advance international norms." The state department's long exile from Pentagon affairs is over, and it looks like the allies will also have a new role—even if the Royal Navy has to trade its carriers for space cruisers and cyber-jocks.

Wall street vs Summers

It's been kept very quiet, but battle has been joined over financial policy. Those Wall Street types who hoped that their old friend and treasury secretary Tim Geithner had things under control are having to think again. Larry Summers at the National Economic Council (NEC) has learned to use the core advantage of having a White House office—namely proximity to the president and his political advisers—to win some important arguments even though he lost the first one.

Back in February and March, Summers began arguing internally for the need to take over Citibank, or at least to plan for it, but Geithner's treasury blocked him with the support of Ben Bernanke at the Fed. The growing public backlash against the banks, triggered by the news that it's bonus time again on Wall Street, has changed things. White House chief of staff Rahm Emanuel and top aide David Axelrod don't want to see Obama end up on the wrong side of this argument, and so have backed Summers on two key issues.

The first was the NEC plan for a new consumer protection agency on financial products, which Wall Street hates and which the treasury has been blocking. The second was the administration's broader reform plan on financial regulation which the treasury drafted, but the NEC then rewrote after the inter-agency reviews. It includes a provision that requires major financial institutions to prepare and then submit for regulatory approval plans for their own dismemberment in the event of a crisis. Wall Street calls it "the funeral plan" and fought desperately against it. Significantly, senate finance committee staffers call it "the Summers clause."

Summers's biggest challenge is whether to throw his weight behind the mounting calls for a second stimulus package. Seeing Obama's approval ratings slump by 18 points in Ohio since May, Axelrod and Emanuel are getting spooked by soaring unemployment and the prospect of losing control of congress next year. Geithner is still talking of green shoots. Summers knows better, but frets over the politics of even more deficit spending. Although his staff have started to look discreetly at what a second stimulus might entail, two factors will decide which way Summers goes. The first will be if unemployment is over 10 per cent by October. The second will be Obama's decision on whether to nominate Bernanke for a second term at the Fed. That's the job Summers really wants. But it requires senate confirmation—and Wall Street lobbyists have very deep pockets.

Sixty is no magic number

Al Franken has finally won his court battle over the close 2008 election result and been sworn in as US senator for Minnesota. His arrival gives the Democrats 60 of the 100 Senate seats and therefore—nominally at least—full control of congress.

But Franken's first act as a senator was to vote against a White House plan to save a measly $6m by dropping a measure to protect buses against terrorists. It's not clear why the White House opposed it, although the amendment was proposed by Republican Senator John McCain, who appears to like the idea of installing explosives sniffers on buses that go past the Capitol. Similarly, when he crossed the floor in April, ex-Republican Senator Arlen Spector's first vote as a Democrat was to vote against Obama's budget. It just goes to show that party loyalty is not something the White House can count on.