Thursday, September 30, 2010

An Inexperienced Campaigner

After reading about President Obama castigating his followers for not being motivated enough I remembered just how inexperienced he is as running a national campaign. If it was not for some major miscalculations, Hillary Clinton would be president today.

Obama caught a break in his first campaign for national office. He did not face serious competition for his Senate seat. He was given a big boost by being the keynote speaker for the 2004 Democratic convention. He gave a great speech, so great that there was talk of him running for president before the applause ended.

Going into the 2008 campaign, Clinton was the favorite with Obama the underdog. He did surprisingly well in the first set of caucuses while Hillary carried the primaries.

The Clinton strategy was to wrap up the nomination by Super Tuesday. Hillary didn't even have staff in states with primaries or caucuses after Super Tuesday. She spent all of her campaign funds.

When the dust settled, Obama was still in the race and Hillary's campaign was broke. It took several agonizing weeks and a personal loan to her campaign to get things moving again. In the meantime, Obama ran almost unopposed in several small primaries. He did not win every one of them but he won at least one every Tuesday for more than a month.

Once the Clinton campaign got organized again, Hillary proved that she could win nearly any large state that she was able to seriously run in. It wasn't enough. Obama was still winning small states where Hillary was not competing.

If that wasn't bad enough, Texas runs dual primaries. Hillary won the vote but it was a Pyrrhic victory. The Texas caucuses gave Obama more delegates than the vote gave Hillary.

The primaries ended without a clear victor. Obama was ahead but there were enough super delegates to give Hillary the nomination. Her case was that she ran better than Obama in the big states, the ones that a Democrat had to carry to win.

Obama got the nomination on the basis of the long list of states that he had won, the sense of inevitability surrounding his campaign, and the fact that he had more delegates.

That leaves the Democrats with a man at the top who has always had problems with tight races and who has trouble connecting with rural voters. None of those weaknesses have gone away. Obama would still rather psychoanalyze the voters than connect with them.

Two years ago Obama didn't have to break a sweat to fire up the voters. The presence of a black man at the head of the ticket fired up a significant portion of the electorate. The fact that he promised to be the anti-Bush fired up the rest. Now the novelty has worn off and Bush is a distant memory. Left to his own devices, Obama is having trouble firing up the voters.

Wednesday, September 29, 2010

Running Against the Man

Today's Democrats have no salable platform and they know it. They have an impressive list of accomplishments but most of these are unpopular. The stimulus is generally judged to have been a failure. The country remains deeply suspicious of the health care reform bill that was passed. The steps that they say were needed to save the economy from another great depression look like bailouts for the rich to a vast swath of the population. President Obama whose coattails they rode on two years ago now has an approval rating below 50%.

With nothing to offer, their strategy is to tear down their opponents. This means going through the opponent's background with a microscope looking for anything that might be turned into a negative. Christine O'Donnell is the most prominent example of this.

It is harder to fund juicy quotes from most candidate's past. When this fails, the Democrats are taking things out of context and blowing them up. Ads running against Steve Stivers claim that he wants to eliminate the income tax and replace it with a 28% sales tax on everything. Stivers never said any such thing but he did check "yes" on a questionnaire asking if he would support replacing the  income tax with a value added tax (VAT). He did not elaborate and the specifics came from an unrelated proposal from a few years ago.

An ad against Rand Paul claims that he is for decriminalizing theft, drugs, prostitution, and burglary. This came from an interview where he was talking about things like motor cycle helmets. He felt that the government intruded too far into people's lives and said that anything non-violent should be legal. Within the context it was obvious that he was talking about areas of personal responsibility and not suggesting repeal of whole sections of laws. This was also an isolated statement and he has since clarified what he meant. Regardless, his opponent is still running the ads.

Alan Grayson of Florida has taken this to a whole new level - that of outright lying. In one ad he accuses his opponent, Daniel Webster, of being a draft dodger. In fact, Webster was given deferments for being in high school and college then declared medically unfit because of foot problems. As a follow-up, Grayson ran an ad comparing Webster to the Taliban. This features clips of Grayson saying that women should submit to their husbands. The clips came from examples that Webster gave of the bible verses that husbands should not use, even though they are in the bible.

The Democrats are desperate to hold onto power but they are unwilling to make their case based on how they have governed. In creating a national strategy based on personal destruction rather than issues they have violated numerous promises about elevating the campaigns and have effectively conceded that their time in office is not worthy of continuing.

Tuesday, September 28, 2010

Moving the Center

This is the standard line from the left - "The country hasn't moved, it's the Republicans who moved to the right." It is part of this year's campaign Democratic election strategy. It is an attempt to capitalize on the Tea Party movement. Today's liberals want a return to the moderates of the Bush years. The funny thing is that they had the same complaint during the Bush years. The only difference was that back then it was the social conservatives who moved the party.

This complaint was typified by Christine Todd Whitman, former governor of New Jersey and head of the EPA for several years under George W. Bush. In 2006, she wrote a book, It's My Party Too: The Battle for the Heart of the GOP and the Future of America. Publisher's Weekly says,

It's her party and she'll cry if she wants to. Former EPA Chief and New Jersey governor Whitman laments the rightward shift in the Republican party, concerned that it "will now move so far to the right that it ends up alienating centrist voters and marginalizing itself." In her view, the aggressive tactics of the "social fundamentalists," to whom "the concept of anathema," are to blame. Only if centrists transform themselves into "radical moderates-people ready to fight for what they believe even if it makes waves in the party," can the party restore its equilibrium. Whitman explores her own GOP heritage and her adventures and misadventures with hot button issues like abortion, stem cell research, race, the environment and women's rights, reinforcing the party's distinguished record. For example, she points out that Republicans ensured passage of the Civil Rights Act and created the Clean Air Act. If moderates would only stand up for themselves, she contends, the party platform could return to the essential issues-"fiscal restraint, reasonable and open discussion of social issues, environmental policies that promote a balanced approach to environmental protection, and a foreign policy that is engaged with the rest of the world." While the writing is straightforward and the anecdotes interesting, the account drifts from its core theme, culminating in a plea to visit a grassroots Web site and a generic suggestion for "issues-oriented campaigns." Nowhere does Whitman identify who these social fundamentalists are, what they want or why they have proven so powerful in today's electoral environment despite being outnumbered. Though this book succeeds as an overview of the Republican party's accomplishments, it's a less than adequate battle plan for moderate Republications looking to attain their past glory.

Much of what Whitman prescribed has happened with the Tea Parties. The new emphasis is on limited government and fiscal restraint. No one is talking much about stem cells or abortion. So, what was described as a move to the center in 2006 is now a shift to the far right.

During the 2008 campaign, Democrats were open, at least in private, about political shifts. They wanted to shift the country so far to the left that the Republicans would either have to follow or be marginalized. It worked on the short-term. John McCain was the party's most liberal candidate since Nixon. He had his own proposals for health care and cap and trade. He made it clear that he would govern to the right of Obama but to the left of Bush.

In the meantime, if you look at what the Democrats passed during the last two years compared to what they did when they held Congress and the White House from 2001-2003, there can be no doubt that they are far more radical than 20 years ago.

It didn't take long before a significant portion of the country objected to this shift. A few bail-outs and several trillion dollars in new spending had people protesting in the street. Most of these protesters would be satisfied with a return to the days of Clinton's second term.

Saturday, September 25, 2010

Krugman: The US is Broke

Paul Krugman recently wrote a column that tried to refute the Republican Pledge to America. Ironically, when you combine what he said and a fact that he must know but didn't say then you have a great argument for cutting spending. Here's what he said:

[...] In other words, Social Security, Medicare and the defense budget are off-limits.

So what's left? Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously (a) making the Bush tax cuts permanent and (b) protecting all the programs Republicans say they won't cut, is to completely abolish the rest of the federal government: "No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid (one-third of its budget pays for long-term care for our parents and others with disabilities). No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress."

Did you get that? Our taxes aren't covering most of what we think of as government.

Now for the part that Krugman didn't mention - interest on the national debt. Interest was the fourth largest single budgeted disbursement category, after defense, Social Security, and Medicare. If we weren't paying that then there would be enough money to cover all of those other functions. The Government Accountability Office says that the current level of debt is fiscally unsustainable.

The $70 billion a year that it would cost to continue the Bush tax cuts for everyone is a drop in the bucket. The current deficit is $1.4 trillion. That makes the "Bush tax cuts for the rich" look like a rounding error.

Raising taxes is not a viable option. A tax increase during an economic downturn (remember, the recession ended last year) would be disastrous. That's why Keynesians, led by Krugman, increased the deficit. But we can't keep spending money that we don't have. Eventually interest on the national debt will grow so large that nothing is left for anything. That's what fiscally unsustainable means.

This doesn't matter to Krugman. He advocates even-increasing deficits on the idea that they will eventually stimulate the economy. He recently threw out the figure of $30 trillion (the current national deficit is $13.4 trillion). This is sometimes called the drink yourself sober school of economics.

What is needed is a real reassessment of the role of government. Politicians have over-promised and left it to future generations to pay the bills. The only way out is to start cutting. The longer we wait the harder it will be and the worse the consequences if we do not.

Thursday, September 23, 2010

Obama loses his mojo

A couple of days ago President Obama held a town hall meeting on CNBC. It didn't go well. This is a metaphor for the president's last several weeks. What happened to his popularity?

An important thing to remember is that his enormous popularity when he took office was as a symbol. A man with dark skin and an African name became the post powerful man in the world proving once and for all that anyone can grow up to be president. A lot of people had no idea where he stood on issues and didn't care.

Once people got used to having a black man in the White House, he lost his first achiever luster and started to be judged on his accomplishments.

Then there is the curse of the super-majority. The entire time Obama has been in the White House, Congress has had 59 or 60 Senators and a comfortable margin of Representatives. This hurt the Democrats in general and Obama in particular in several ways. With such a majority, the Democrats did not feel any need for bipartisan compromise. This helped the Republicans keep their solid voting block. Why would any of them break ranks when the Democrats were not offering them anything? But this meant that they needed every vote from the Democrat Caucus to break filibusters. That gave each senator more bargaining power. The moderate senators took advantage of this. The result was messy legislation. The far left was upset because they couldn't get the more radical parts of their agenda through. Everyone else felt trampled. If the Democrats had a couple more or a couple fewer senators then they either could have ignored the moderates or they would have had to compromise. Along the way, the President outsourced the writing of his signature legislation to the back rooms of Congress.

Obama also had the curse of his promises. He made twice as many promises as most presidential candidates do. That's a lot to live up to. But it gets worse. Many people expected him to live up to promises he never made. He came out against same-sex marriage but his supporters assumed that he was lying in order to get elected. A repeal of Don't Ask/Don't Tell has been low on his priorities. Other groups feel similarly slighted.

His handling of the economy has hurt him more than anything. Originally his team forecast a strong recovery starting late last year. A year ago his economic team was talking about "green shoots". The was supposed to be the "Recovery Summer" when the jobs from the stimulus kicked in and the Great Recession finally ended. Just this week it was announced that the recession actually ended in June of last year. This leaves the White House looking clueless. Obama needs the financial sector, what he calls "Wall Street" but he doesn't like them. In fact, he is, at best, apathetic about employers in general and his focus on health care made it appear that he does not care about the millions of unemployed.

President Obama's favorite quip about the Republicans and the economy goes, "They drove us into this ditch and now that we are almost out they want the keys back." This is a great applause line but it underscores two hard truths - the crash may have happened under the Republicans but the Democrats managed the recovery and it has been a flop. After hearing the President say this you wonder if he really believes that things are nearly back to normal?

On his CNBC appearance one of his supporters told him that he needs to come out and tell us if this is a temporary downturn or the new normal. as always, he passed. To the Obama administration, recovery is just around the corner. His economic team probably told him early on that recovery would be slow but he kept this secret for political reasons (if they didn't tell him that there would be a slow recovery then the remaining ones should be sacked). Had Obama told the country early in his administration that this would be a long, slow recovery he could have shifted the blame. Instead he used the recession as an excuse to pass the mother of all pork barrel bills. Once the stimulus was passed, the recovery was his problem, not Bush's. In addition, the stimulus and a home-owner bailout gave rise to the Tea Party.

Finally there is the war in Afghanistan. Between 2004 and 2008, the Democrats insisted that this was the good war and that the war in Iraq was the bad war. They would abandon the bad war and use the resources to win the good war. Many Democrats were lying. They wanted out of both wars but they didn't want to seem weak on defense. They are outraged that Obama followed through on his promise to try to win the war. So far things do not look good. It looks all the worse because President Bush was able to get Iraq under control. Even the war's supporters are getting tired of it. But if Obama loses Afghanistan then he will hurt the Democrats for a generation. They are still living down the loss of Viet Nam. A second loss would permanently mark them as surrender monkeys.

A great leader could recover from these setbacks but Obama has gone from being an electrifying candidate to a boring president. Instead of fainting in his presence, his supporters now complain that they are exhausted. His failures, the economy and the war, are dragging him down and his wins, health care and the stimulus, are so muddied by back-room dealing that they cannot provide a counterbalance.

All told, it is no wonder that things look so bad for the Democrats going into the mid-term election.

Wednesday, September 22, 2010

Trashing Conservative Women

Since winning the Delaware primary, Christine O'Donnell has become the nation's best-known candidate. That's not a good thing, not when things you did in high school and views you had in your early 20s suddenly become part of late-night comedy routines. Granted the right has piled onto some of the Obama administration but these have been political appointees and it is their political statements that have been the subject of controversy (Van Jones).

Over a decade ago O'Donnell said that masturbation was the same as adultery. Back in 1976, Nobel-prize-winner and former president Jimmy Carter said that he had committed adultery many times by simply looking at a woman with lust in his heart.

At the age that O'Donnell was denouncing self-love, her opponent wrote about becoming a "Bearded Marxist". As far as I know neither Leno nor Stewart has picked up on that.

The national attack on O'Donnell reminds me a lot of the attack two years ago on Sarah Palin. Both are fairly young and attractive and both hold values that are radically different from the hard left. In both cases the left has used the "politics of personal destruction" to attack the person instead of the platform. Compared with the attacks on Palin, the attacks on O'Donnell have been fairly light. At least no one has accused her of faking a pregnancy.

Still, there is a message there for Republican women - if the Democrats think that they can benefit from it then they will savage you mercilessly from coast to coast. Does anyone else find this creepy?

Tuesday, September 21, 2010

Karl Rove and the Tea Party

Right now we have what amounts to three parties representing three political poles. One axis is social going from conservative to liberal. This covers things like gay marriage, the Pledge of Allegiance and the place of religion in society. The other axis is the power of government. Right now the mainstream Republicans and Democrats are at the high end of government power and mainly differ over social values. The Tea Party is somewhere between neutral and conservative on the social axis and has the low end of government power to itself. There used to be a less-government wing of the liberals but it atrophied a long time ago and is not worth mentioning.

The mainstream Republicans and the Tea Party are fighting it out for control of the Republican Party and Karl Rove is in the thick of it. While he sounds reasonable when he says that it is better to run a big-government Republican who can get elected he has a conflict of interest - he is the architect of this split.

Rove's maxim has always been that there is no constituency for small government. On the face of it, this can be argued. Ross Perot won 19% of the 1992 national vote on a platform of fiscal responsibility even though he ran as an independent. Limited-government also attracts some influential single-issue voters like the gun lobby.

Rove means something completely different when he talks about constituency. Whenever government exercises its power, it chooses winners and losers. This means that every issue has deep-pocketed lobbyists.

This is how the Republicans operated during the Bush administration. There was no question of shrinking government. Bush was a supporter of big-government. The question was how the government would be run. Election campaigns often turned on the question of who you trusted to runt he government. That is why Bush handily beat Kerry. Bush came off as a regular guy who you could trust to do the right thing while Kerry came across as clueless.

The hallmark of the Bush administration was a huge increase in domestic spending and an accompanying increase in earmarks.

Rove's strategy for a permanent Republican majority was to appeal to regular voters while filling the campaign coffers with lobbyist cash which was rewarded with earmarks. He somehow assumed that no one would notice how corrupt that system was.

Of course, the Democrats did notice and successfully ran against spending, earmarks, and lobbyists in 2006 and 2008. They failed to deliver on their promised reforms which gave rise to the Tea Party.

All of this is why Rove would rather see a Democrat elected than a Tea Party Republican. If the Tea Party takes over then his vision for the future has been repudiated and his influence is ended.

Thursday, September 16, 2010

The Tea Party and the Republican Establishment

I have lived in the same congressional district for over 30 years. In all of those years, there has never been a primary challenger. When I first moved in my representative was Chalmers Wylie who had been in office so long he probably remembered Lincoln. He finally retired after some of the Congressional scandals in the early 1990s. He was replaced by Deborah Pryce who retired in 2008. Even though I usually vote Republican, neither of these candidates represented me very well. Pryce, in particular, provided the margin of victory for some of President Clinton's early legislation that I did not agree with. She was also a consistent anti-gun vote. I would have loved to have traded her in for a more conservative candidate. But it never came up.

Ohio has a long history of suppressing primary challengers. They claim that it is to save the public money that would be spent on elections. The result has been a long line of establishment candidates - people who were moderates and who where known to work with the party. This has not always worked out.

For years Ken Blackwell wanted to run for governor. In 1998 he was the state Attorney Treasurer and the establishment candidate was secretary of State Robert Taft. The reasoning was that a) it was Taft's "turn", that he would work with the party establishment better than Blackwell and that c) the party owed the Taft family. After much negotiation, Blackwell agreed to run for Secretary of State and wait his turn. Few people said it in public but people who were familiar with Taft's job as Secretary of State felt that he was incompetent (I knew people who worked for him who echoed that assessment).

Taft ended up being a disaster. His administration was plagued with scandals that dragged down the entire Ohio Republican party and hurt the national party. By the time Blackwell got to run in 2006 the well had been poisoned and no Republican could win. While I do not agree with all of Blackwell's positions (gay marriage), I still think that he would have been a better governor.

The point to this is that the establishment candidate is not always the best candidate nor the one who best represents the districts views. Instead the candidate is the one who is best-connected to the central committee. The Democrats are no better. They do the same back-room deals.

I can't help but think of this when I see Karl Rove arguing that the Tea Party is nominating unelectable candidates. A decade ago Rove felt that there was no constituency for limited government candidates and engineered the ejection of the libertarian wing of the party in favor of big-spending Republicans. George W. Bush called them Compassionate Conservatives.

The Republicans need a new image, different from Bush and big government. The Tea Party is providing that and tapping into a national mood but it threatens the establishment' stranglehold on power. An ugly side has been revealed where the establishment would rather lose to a Democrat than to a conservative Republican. This is self-serving and self-destructive. It also becomes a self-fulfilling prophecy when they refuse to support a candidate because he is "unelectable".

Wednesday, September 15, 2010

Figuring Out Obama

President Obama continues to be a mystery to many, maybe most, Americans. Attempts to categorize him quickly fail. He is all over the political map on various issues. The latest effort comes from Dinesh D'Souza and suggests that we look as Barrack Husein Obama, jr as an extension of Barrack Husein Obama, sr., an anti-colonialist who is trying to make up for America's colonial influence over the world. Others including Glenn Beck have said this all along but this time it has caught the attention of prominent conservatives such as Newt Gingrinch. Others are piling on. Liberal sites such as Huffington and Slate have pronounced this as stupid or even a variation of Birtherism. Even moderate conservatives such as Kathleen Parker reject the idea.

So, is there anything to it? D'Souza's main source is impeccable - Obama's own book, Dreams from my Father.

In his own writings Obama stresses the centrality of his father not only to his beliefs and values but to his very identity. He calls his memoir "the record of a personal, interior journey--a boy's search for his father and through that search a workable meaning for his life as a black American." And again, "It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself." Even though his father was absent for virtually all his life, Obama writes, "My father's voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people's struggle. Wake up, black man!"

The climax of Obama's narrative is when he goes to Kenya and weeps at his father's grave. It is riveting: "When my tears were finally spent," he writes, "I felt a calmness wash over me. I felt the circle finally close. I realized that who I was, what I cared about, was no longer just a matter of intellect or obligation, no longer a construct of words. I saw that my life in America--the black life, the white life, the sense of abandonment I'd felt as a boy, the frustration and hope I'd witnessed in Chicago--all of it was connected with this small piece of earth an ocean away, connected by more than the accident of a name or the color of my skin. The pain that I felt was my father's pain."

In an eerie conclusion, Obama writes that "I sat at my father's grave and spoke to him through Africa's red soil." In a sense, through the earth itself, he communes with his father and receives his father's spirit. Obama takes on his father's struggle, not by recovering his body but by embracing his cause. He decides that where Obama Sr. failed, he will succeed. Obama Sr.'s hatred of the colonial system becomes Obama Jr.'s hatred; his botched attempt to set the world right defines his son's objective. Through a kind of sacramental rite at the family tomb, the father's struggle becomes the son's birthright.

D'Souza also adds his own experiences growing up in post-colonial India and shows how anti-colonial attitudes match up with Obama's actions.

Obama's attitude toward the UK and Europe in general only make sense if you believe that he still carries some of his father's resentments. In his first state visit to Obama, them-Prime Minister Gordon Brown brought special one-of-a-kind gifts. In return, he was given a DVD set that will not play in Europe and some junk from the White House gift shop. It is hard to imagine a clearer snub.

Obama went out of his way to improve relations with anti-colonialists such as Hugo Chavez and Iran and has snubbed India and most of Europe. Either he has a bias against countries that he sees as colonial powers (which is ironic when applied to India) or he is trying to punish countries that were friendly to the Bush administration and court countries that were hostile to Bush. Neither makes for a rational foreign policy. You can decide which explanation you are more comfortable with. I have not seen any others advanced.

Obama's domestic policies have also been hard to figure out. He actively dislikes business but he passed on chances to nationalize important industries such as banks and automobile makers. He prefers strict government control while leaving businesses in private hands (with the exception of college loans). To Glenn Beck, this looks like Fascism (the Italian kind, not the German kind). To D'Souza it looks like anti-colonialism. Both have their roots as a "lite" version of socialism so it is hard to trace exactly where he came by this instinct.

Barrack, Sr came to a new country to study then returned, abandoning his wife and child. He made some impact on the new, post-colonial government but ended up a drunken outsider. Being abandoned as a child had a strong affect on Barrack, Jr as shown by his quest to uncover his father's roots. Doubtless one of his motivations is the hope of gaining his father's posthumous approval but that was only one influence. Obama's mother was also anti-capitalist. At one point she refused to attend a business party with her second husband because the Americans there weren't "her people." They were capitalists. In high school hung out with a retired communist who he did not name. In college he hung out with the Marxists and feminists and later spent years as a follower of socialist Saul Alinsky. While his father's attitudes must be part of the forces that motivate Obama, there have been too many other influences to simply classify him as an anti-colonial socialist.

The mystery of Barrack Obama, Jr, continues.

Monday, September 13, 2010

Myths from the Left

There are a number of propositions being tossed around regularly by the left as justification fro proposed action. I considered being cruel and calling this post "Lies from the Left" but that would be unfair. Lying implies that the source knows that he is not telling the truth. The left believes all or most of what they are saying but they are wrong, anyway. These have reached mythic status because they are constantly repeated. They are also dangerous because they are setting a basis for government action.

The deficit is caused by the Bush tax cuts (for the rich). This is two myths in one. Currently the left cannot resist adding those last three words. It gives the impression that Bush's tax cuts were limited to the rich. Actually, the tax cuts were pretty much a 5% rate cut across all margins. Regardless, the cost of the Bush tax cuts over a decade was estimated to be less than the current one-year deficit and the deficit for 2007 which included the tax cuts was a fraction of the current deficit. The deficit is caused by a combination of decreased revenue caused by high unemployment and underemployment combined with increased government spending.

This myth is being used to set the groundwork for rolling back the Bush tax cuts on people making more than $250,000. That will not make a meaningful change to the deficit. If anything, it will take the pressure to cut spending off of lawmakers.

President Bush took a budget surplus and turned it into a deficit. This is often combined with the first myth about the Bush tax cuts. It is true that the budget went from surplus to deficit under Bush but there is more to the story. Budget projections when Bush took office were based on uninterrupted economic growth. That did not happen. The country had slipped into a mild recession by the time Bush took office. The economic hit caused by the September 11 terrorist attack also affected the budget. In addition, the economy under Clinton was influenced by the dot-com bubble which was unsustainable. The truth is that the surplus would have vanished regardless of who was elected.

Originally this myth was being used in campaigns to justify electing Democrats. The understanding was that once the Democrats were in charge they would rein in the deficits. Obviously that did not happen. It still surfaces as a reason to keep Democrats in office, even though they have not shown any interest in fiscal restraint.

The Gap between the rich and poor is growing because of the Reagan tax cuts. This is an example of a questionable cause. Just because one thing happened after the other does not mean that one caused the other. Yes, the rich have gotten richer but the tax cuts are not the sole reason. Slate did a piece on this recently and concluded that the Reagan tax cuts were not big enough to have caused the shift in wealth. Other explanations have been suggested but the truth is that no one is positive. This myth takes the one about Bush's tax cuts and does it one better, laying the foundation for a return to redistributive tax rate.

The rich "waste" their income by saving it. Robert Reich, Secretary of Labor under Clinton, uses this one constantly. This is rooted in Keynesian economics which holds that recessions are caused by a slowdown in the velocity of money. The multiplier effect comes when I pay you a dollar and you use part of it to buy something else. If I pay you a dollar and you either save it or use it to pay down a debt then there is no multiplier and the economic benefit is "wasted".

Originally this was used as an excuse for excluding the rich from the stimulus. Now it is being used as an excuse for raising taxes on the rich.

The audacity of this myth is breathtaking. It presumes to dictate how money should be used i.e. to the benefit of society in general instead of for the individual. It assumes that the rich already have more money than they can use and will just stick the extra someplace. It also seems to assume that the rich stick their money in a mattress or, at best, a savings account. What Reich calls "saving", everyone else would call investing. The money might go into the stock market or the bond market or straight into a business. All of these are essential for the proper functioning of our economy. To call any of these "wasted" is to totally misunderstand how the economy works.

If taken to its logical conclusion then this myth turns outright scary. The logical extension of this is that the government should confiscate wealth above a specific amount since it is being wasted, anyway.

We can end the recession if we just spend enough in stimulus. It is an accepted fact that World War II ended the Great Depression. Nobel Prize-winning economist Paul Krugman simplifies this relationship, claiming that massive government spending ended the Depression. He goes on to suggest that we can end the current recession if we just spend comparable amounts. He recently suggested $30 trillion or $100,000 for every man, woman, and child in the country. The current national debt is $17 trillion so he would nearly triple it.

This shows that wining a Nobel Prize for work in micro-economics does not make you competent to comment on macro-economics. The only way that Krugman's stimulus would work would be if we spent the $30 trillion waging war on the rest of the world with the goal of destroying their industrial capacity.

No stimulus has ever ended a recession. Krugman's answer that no stimulus has never been big enough remains unprovable because the ruinous amount of debt that a government would have to take on to try it.

Bush and the Republicans caused the recession because of deregulation of the financial sector. The left hates Bush and it hates deregulation so the two must be linked and have caused the recession. Things are a lot more complicated.

First, the financial instruments that caused so much damage in the financial sector were so new that they had never been regulated. Second, the parts of the mortgage industry that were under federal regulation were under heavy government pressure to behave in an unwise manner. Banks were told to increase minority home-ownership. In order to do that, they had to drop long-standing loan standards. There were many fingerprints on this including prominent congressional Democrats.

They got away with this for years because the new standards caused a housing bubble. As long as prices rose, someone could default on a loan and still come out ahead y selling the property for a profit.

This led to a general credit-bubble. Consumer debt rose from 90% of annual income to 130%. None of the rules put in place by FDR or since covered this in any way. Likewise, the creation of Too Big to Fail institutions had nothing to do with Bush. This started in the mid-1980s when state legislatures began relaxing rules about interstate banking and was capped by the Riegle-Neal Interstate Banking and Branching Efficiency Act which was signed into law by Bill Clinton.

All told, these myths form a justification for the biggest expansion of government power in decades. They are being repeated constantly in opinion pieces and in interviews. They are harmful and must be countered.

Friday, September 10, 2010

Is it 1982 or 1978?

Reportedly the White House has accepted that the Democrats will have major losses in 2010 but are comparing this year to 1982. At that point, Ronald Reagan was half-way through his first term and the economy was still doing badly - the country was in a double-dip recession and unemployment was the worst since the Great Depression. The Republicans suffered major losses in Congress and in state government across the country.

In 1983 the economy picked up, starting a boom that would last nearly 30 years. In 1980 Reagan won the election on the question, "Are you better today than you were four years ago?". By 1984 he could campaign on the same question. Both inflation and unemployment were lower than in 1980. The economy was booming. The only real question was if Reagan could win in all 50 states (he carried 49).

So, can President Obama start writing his 2013 inaugural address? I doubt it.

President Obama is no Ronald Reagan. Reagan came across as a warm, likable father-figure. There was argument about his economic theories but no one could say that he was ignoring the economy. In contrast, Obama comes across as a cool, aloof professor. Obama spent most of his first 18 months concentrating on health care with the economy a distant third or fourth on his priorities.

Reagan was also elected because President Carter seemed impotent after the government of Iran seized the American embassy staff and held them hostage. Reagan made America feel strong again. Obama was supposed to have made us feel loved but has failed to deliver.

Presidents live and die by the economy. A president who runs during an economic boom tends to win by a landslide. A downturn means defeat.

In order to believe that the economy will rebound as it did in 1983, you have to believe that the president's economic policies have no effect. Reagan cut taxes and spending. Obama has a mixed record on taxes, he raised some and lowered others. There is no question about his spending - he raised spending across the board. The success of Reaganomics makes Obamanomics look risky.

In fact, the current debate is not when the recovery will begin, it is if the recovery will fail. There is no chance of the economy suddenly picking up. The current problems are rooted in years of binge spending and bubble real estate values. What recovery we have had to date has produced few jobs. Reagan's policies encouraged investment and spending. Obama's policies cause anxiety.

At this point in his term, Obama looks more like Jimmy Carter or even Gerald Ford - a president who came into office with a great deal of public good will but who seems overwhelmed by the economic problems that he faces. Obama's prospects are closer to 1978 than 1982.

Obama could hope to repeat 1994 when Clinton lost control of both houses of Congress but went on to reelection after moving to the right of his party. This will be difficult for Obama. Both he and his party have moved significantly to the left since 1994. Also, Clinton had a better economy to run on. The country came out of a mild recession as he took office and the beginnings of the dot-com bubble gave him a good economy to run on in 1996. Moreover, members of his party are anticipating a shift to the right and will resist it.

None of this guarantees a Republican win in 2012. They will still have to run a good candidate. I doubt if any of the top-tier candidates from 2008 qualify and I have real doubts about the electability of Sarah Palin. That leaves a big hole for the Republicans to fill in the next 16 months.

Thursday, September 09, 2010

Executive Pay

The current line for the Left is that executive pay is too high and something needs to be done about it. That's not how they phrase it. They toss around terms like "Wall Street" and "the Rich" but that's what they mean. Executive pay has changed several times over the last few decades, almost always in response to government policies.

From the Great Depression through the early 1980s, most executives worried about tax shelters. They worried a lot. Tax rates were confiscatory. JFK lowered them some but even in the 1960s and 1970s, it was a national passion trying to keep a hold of your money. Since the alternative was to have over half of your income taxed away, there was a significant return on doing this.

During this period tax-free benefits increased greatly. Expense accounts were lavish. I knew one man who owned a trucking company and had his Mercedes and his private plane listed as company vehicles.

In the early 1980s, Congress under Reagan make some major tax cuts. After that, taxes were low enough that people moved their money to investments that were taxable but paid higher returns. Over time, pay was changed to eliminate the tax shelters and go to direct pay.

When Clinton took office in 1993, his Secretary of Labor, Robert Reich, felt that executives were being paid too much and that their pay did not reflect their performance. He wanted their pay directly tied to company earnings. His solution was to replace pay with stock options. He used the power of the government to convince most corporations to switch.

This had a few unintended consequences. One was that it fueled the Dot-Com bubble. The other was the charge that executives were more interested in manipulating stock market prices than in making the best long-term decisions for the company. Again, this was seen as a crisis that the government had to involve itself in.

The new solution was to tie pay to profits as an annual bonus. These would be based on an individual's business unit, not company performance in general.

Which brings us to today. When your employer makes billions, it only takes a small percentage to get a seven-figure bonus. Moreover, it is quite possible for your unit to have been profitable even when the business in general lost money.

So the immoral bonuses that bank executives were getting last year came about directly because of government influence on how companies are paid.

The newest line is that the rich control too much wealth and that the government needs to redistribute it. That is why President Obama announced that he will support extending the Bush tax cuts, but only on people making less than $200,000 ($250,000 for families). Others are not so generous. Les Leopold of Huffington calls for a return of steep progressive taxes in order to pay for a new, larger stimulus.

This was tried at the beginning of the Great Depression. In fact, many economists believe that this is why there was a Great Depression in the first place. Trying to redistribute income can wreck an economy.

Wednesday, September 08, 2010

The Meaning of the First Amendment

First Amendment are suddenly an issue. Consider:

A group wants to build a mosque near Ground Zero.
Other groups are protesting the mosque.
A small church plans to hold "burn a Koran day".

The reaction to these:

Many on the left are insisting that the mosque will be a monument to tolerance and diversity.
Many on the left insist that protesters have no right to protest.
Many on the left condemn the Koran-burning. The Secretary of State has said that it is un-American.

The First Amendment issues get complex from here. Yes, the Muslims have a right to build a mosque, even if it offends people. Similarly, the First Amendment gives people the right to object to the mosque. People who are in favor of the mosque seem to forget that their opponents also have a right to be heard.

This is the issue at the heart of the Koran-burning. Freedom of religion means just that. You can say that your religion is the only true one. You can give examples of why other religions are wrong. You can publish a book on why all religions are wrong. And you can burn holy books from other religions. That much is a First Amendment right.

Which does not mean that burning a pile of Korans is not offensive. Here is where it gets interesting. Building the mosque is also offensive to millions of people but the people condemning the Koran-burning are supporting the mosque.

This is further complicated by international politics. When a claim was published that a Koran had been flushed down a toilet, it became an international incident. It also turned out to be a fabrication. A few drops of water touched a Koran and the story grew in the telling. By the time the story ran itself out, people had died in international rioting.

Burning several Korans is bound to provoke international outrage. Gen. David Petraeushas compared it to Abu Ghraib. Several top US officials have asked the church to cancel the event.

So where does that leave us? Are we going to put an asterisk on the First Amendment saying "* Not valid in cases of foreign outrage"? Our leadership has made it clear that they care more about international pressure than First Amendment rights. To be fair, the burning will make it more difficult to conduct the war in Afghanistan but it would be nice to hear someone in the administration acknowledge that the book burning is a constitutional right and part of our cultural heritage. It would also be nice for someone to point out the number of US flags that are burned abroad.

Obviously, offending millions of Americans with a mosque is ok but offending millions of Muslims is not. Is this because they know that Americans may stage orderly demonstrations instead of deadly riots?

Finally, Secretary of State Clinton asked that the press stop covering the story. There is a measure of wisdom in this. The coverage is all out of proportion to the size of the congregation. But freedom of the press is another of those First Amendment freedoms.

Tuesday, September 07, 2010

Out of Touch

The Democrats have a real problem this Fall. Led by the White House, they are completely out of touch with the country. There are many instances of this but the worst was the "Recovery Summer" pitch. Unemployment has not moved significantly. House and automotive sales are down. Economists are worried about a double-dip recession. For the President and Vice-President to be touring the country talking about a recovery is so out-of-touch as to seem cruel.

This is nothing new. Democrats spent the early months of 2010 pushing the White House to start doing something about the economy. Instead, Obama and Congress seemed fixated on health care reform.

Which brings us to their second problem. They were convinced that, once passed, health care would quickly become popular. Some pundits on the left predicted that this was the path to a permanent Democratic majority - that the public would be so grateful to the Democrats for health care and so worried about Republicans taking it away that Republicans would be reduced to a permanent minority status. The expected rise in popularity has not happened yet. In fact, health care is likely to become less popular over the next few years because the taxes that will support it kick in years before most of the benefits. I'm not sure why the Democrats thought that people would be grateful for measures that they will not see for years but that is part of the whole Democrat disconnect. The message that voters will take home is that the Democrats are more concerned about their agenda than the economy.

Obama suddenly announced a new job program rebuilding the nation's infrastructure. Coming so close to the election, it looks like what it is - a last-minute attempt to woo voters. The stimulus was supposed to rebuild the infrastructure but degenerated into repaving projects in the name of "shovel-ready". Now Obama is proposing a new infrastructure program. Will this be any more successful?

Social Security represents the Democrats' best chance at minimizing their losses but this requires a disconnect from actuarial realities. I'm not sure how many Democrats believe their line about the program being secure until 2034 and how many know better but are using this as a wedge issue. Regardless, this will have to be addressed eventually and the sooner it is done the less painful it will be. An increasing number of people are worried about the status quo so this will eventually backfire as a wedge issue.

President Obama himself is hopelessly out of touch with the American people and always has been. In the 2008 primaries, he had trouble winning rural states. Even in the election, most of his votes came from the cities. He looks down on rural Americans (remember the "clinging to guns, religion, etc." slip). He was raised overseas and in Hawaii and has spent most of his life since then in academia. On divisive issues (Arizona immigration, Ground Zero Mosque, etc.), he usually comes down on the minority side. He talks about "arugula" and drinks imported beer.

Obama also has a tin ear for appearances. As the nation worried about unemployment and the economy, he spent vacations at exclusive New England resorts (not to mention his wife and one daughter going to the Spanish Riviera). George W. Bush figured out pretty fast that it looks bad for a war-time president to be seen playing golf. Obama still has not learned that lesson.

He is easily offended and takes criticism personally. He recently complained that he is treated like a dog. Presidents need a thick skin. They cannot please everyone and much of the opposition is honest and principled. Obama does not grant the other side the right to disagree. To him, they are either lying for political reasons or because big-moneyed interests have bought them. Even the Supreme Court has come in for criticism from the President.

Obama should think back just a few years to how President Bush was treated and the things that Obama himself said. So far his treatment has been mild compared to what both Bushes, Clinton, and Reagan had to put up with.

Instead he lashes out, accusing dissenting Republicans of being stooges of Rush Limbaugh or Glenn Beck and threatening to remove Fox News's press rights. This further isolates the Obama White House.

All of this could be forgiven if Obama was better at selling his programs. He is not. During the campaign he talked about vague goals of hope and change against backgrounds borrowed from communist and fascist symbols. As president, he does not persuade, he gives boring lectures.

Obama and the Democrats' final problem is that they are out of touch with their base - the Progressive Left. They were the ones who initially supported him over Hillary because of Bill Clinton's moderation. These people were expecting really big changes. When Obama delivered big changes they announced that it was all or nothing and any compromise was equivalent to nothing. They were also disappointed when Obama outsources his economic policy to two insiders. Obama failed to make his case to them and they will probably stay home for the next election cycle or two.

When Obama and the Democrats came into office they must have realized that they had two possible choices. They could dash off a quick stimulus bill and move onto their real agenda, hoping that the economy would improve on its own and they could take credit or they could concentrate on the economy and possibly miss their chance at passing heath care. Obviously they went with the first choice, obsessing on passing it to the exclusion of everything else. The economy is now a last-minute fix-up proposal.

The Republicans could not possibly have damaged the Democrats as much as they damaged themselves. To use Obama's favorite metaphor, the Republicans may have driven the economy into the ditch but at least they kept their eyes on the road. The Democrats have kep ttheir hands off the wheel and their eyes off of the road.

Friday, September 03, 2010

The 1970s and Paul Krugman

Economics seemed so simple in the 1960s. There was a strong relationship between inflation and unemployment. If unemployment got too high then all that government had to do was crank up inflation and it would automatically drop. Similarly, a rise in unemployment meant that inflation would automatically fall. The trick for government was finding the balance point where both inflation and unemployment were low enough that voters were satisfied.

Then the 1970s came and economists were presented with a new phenomenon - stagflation. This meant a stagnant economy with high unemployment accompanied by high inflation. A lot of economics texts had to be tossed in the trash after that and new economic theories formed.

Apparently Paul Krugman held on to his old books. A recent column makes this statement:

What about inflation? Amid the inflation hysteria of early 2009, the inadequate-stimulus critics pointed out that inflation always falls during sustained periods of high unemployment, and that this time should be no different.

I suppose that he would explain this away saying that inflation did eventually drop in the early 1980s. The whole argument is strange. He is arguing that future inflation will not happen because of current unemployment and his proof is that high unemployment in the past has caused high inflation to drop.

The Fed has also bought into the idea that rising inflation will reduce unemployment. Most of their moves should have been inflationary but instead fell flat.

Krugman is laying the groundwork for more stimulus. He insists that what was already spent was insufficient, even though it was greater than the cost of the seven years we spent in Iraq. This is nothing new. He has insisted all along that the government needed to spend trillions on stimulus.

This call for additional stimulus is based on a simplified version of Keynesian economics but the Progressives are not really Keynesians. They are merely using Keynes as an excuse. If they were real Keynesians they would would never consider a tax increase during a recession but they have already passed a few tax increases with more being proposed. Most Progressives want to close the deficit by raising taxes on the rich - something Keynes would never agree to in the current economic climate.

The quote about never letting a crisis go to waste has been overused but it certainly applies here. In the name of stimulating the economy, the Obama administration focused on long-term goals rather than actual stimulus. The Progressives are beginning to admit this and wonder if that was why the stimulus didn't stimulate.

Germany has taken the opposite route and embarked on a policy of fiscal restraint. It's economy seems to have responded. Krugman scoffs at this pointing out that most of the austerity is in the future. He promises that a future fueled by extravagant sending will be brighter but refuses to recognize that this policy leads to crushing debt and austerity.

Thursday, September 02, 2010

More on the Obama/Muslim Rumor

In the wake of a poll showing that a quarter of the country thinks that President Obama might secretly be a Muslim, the press has been looking for causes. In many ways they are adding to the controversy. Just by reporting on it, they are spreading the idea to people who might not have heard it in the first place.

A frequent target of blame is the Republican Party. The quote, "I take the president at his word" by Senate Minority Leader Mitch McConnell, is often cited as a secret code. What is totally overlooked is the role that Secretary of State Hillary Clinton played in this. Back when she was running against Obama, 60 Minutes had this exchange:

STEVE KROFT: You don't believe that Senator Obama's a Muslim?

HILLARY CLINTON: Of course not. I mean that's, you know, that, there is no basis for that. You know, I take him on the basis of what he says, and, you know, there isn't any reason to doubt that.

KROFT: You said you take Sen. Obama at his word that he's not a Muslim...

CLINTON: Right, right..

KROFT: …you don't believe that he's a Muslim.

CLINTON: No! No! Why would I? There's nothing to base that on. As far as I know.

Note the similarities with McConnell's statement. Obama supporters were outraged at the time but that seems to have been forgotten.

More important, the Clinton campaign was likely the originator of the entire secret Muslim theory in the first place. They likely sent this email out in December of 2007.

"Obama's parents met at the University of Hawaii . When Obama was two years old, his parents divorced. His father returned to Kenya . His mother then married Lolo Soetoro, a RADICAL Muslim from Indonesia . When Obama was 6 years old, the family relocated to Indonesia . Obama attended a MUSLIM school in Jakarta."


"Since it is politically expedient to be a CHRISTIAN when seeking major public office in the United States , Barack Hussein Obama has joined the United Church of Christ in an attempt to downplay his Muslim background."

Somehow the press has completely forgotten that the secret Muslim smears originated within Obama's own party, not the Republicans or the talk shows.

For the record, Lolo Soetoro was a moderate, and the Muslim equivalent of a "Christmas and Easter Christian" and he attended a public school in Jakarta although he was registered as a Muslim. This leads to another way that the press stokes the controversy. Most of the people writing about it are Obama supporters and know that he is not a secret Muslim. They are trying to convince people that there is nothing to the story so they scrub the details. Look at this article from Newsweek by Sharon Begley and note how it takes McConnell to task:

Somehow McConnell couldn't bring himself to state the truth that the guy went to a Christian church in Chicago, was married in a Christian ceremony, is raising his daughters as Christians, and is a practicing Christian.

Somehow Begley cannot bring herself to mention that Obama was raised by Atheists and Muslims. People know this. When the press hides details it gives the impression that they are covering something up. That just feeds the rumor-mill.

Blaming the Republicans for a rumor started by the Democrats alienates them for no good reason (except to demonize the opposition).

Wednesday, September 01, 2010

Reforming the IPCC

The Intergovernmental Panel on Climate Change (IPCC) was created in 1988 to review the scientific literature on climate change and answer two basic questions - is the world getting hotter and, if so, is it because of human activity. The first assessment report said basically, 1) Yes, slightly, and 2) No way to tell. The report was condensed into a summary for policy makers which was the most commonly quoted version. It changed the answers to 1) Yes, 2) Yes.

By the time the fourth assessment report was issued in 2007, the IPCC had changed. The summary for policy makers was released before the actual report. The report included projections of ways that warming would harm the environment and included confidence levels of how likely different scenarios would happen. The IPCC shared the Nobel Peace Prize with Al Gore for warning the world about the dangers of global warming.

Critics complained that there were numerous fundamental problems in the report. The criticism gained ground over the last winter when it was found that some of the most drastic predictions were poorly sourced. In response to the resulting outcry, the InterAcadeny Council (IAC) did an assessment of the IPCC. The report is quite polite but, reading between the lines you can see some strong criticism.

One of their findings is that the chair of the IPCC should be a full-time position and limited to a single six-year term. Currently it is a part-time position with two six-year terms. The report does not mention is that the current chair, Rajendra K. Pachauri, has made a tidy sum doing consulting on ice loss in the Himalayas. He was retained for this because the 2007 assessment predicted that the Himalayan ice will be totally gone by 2020. This was one of the controversies. This date came from an off-hand comment during a phone conversation, not from a peer-reviewed study and was provided to the IPCC by an advocacy group. Pachauri defended the claim for some time, impugning the motives of anyone who questioned it. This represented a huge conflict on interest where he had a financial stake in the outcome.

The IAC also took issue with the use of material from advocates.

The use of so-called gray literature from unpublished or non-peer-reviewed sources has been controversial, although often such sources of information and data are relevant and appropriate for inclusion in the assessment reports. Problems occur because authors do not follow IPCC's guidelines for evaluating such sources and because the guidelines themselves are too vague, the committee said. It recommended that these guidelines be made more specific — including adding guidelines on what types of literature are unacceptable — and strictly enforced to ensure that unpublished and non-peer-reviewed literature is appropriately flagged.

As the Fourth Assesment was being produced, the IPCC was under pressure to make the findings sound more urgent. Responding to this, the report switched from giving percentage ranges to confidence levels. The IAC's findings on this:

The Working Group II report, for example, contains some statements that were assigned high confidence but for which there is little evidence. In future assessments, all Working Groups should qualify their understanding of a topic by describing the amount of evidence available and the degree of agreement among experts; this is known as the level of understanding scale. And all Working Groups should use a probability scale to quantify the likelihood of a particular event occurring, but only when there is sufficient evidence to do so.

In other words, if you are going to assign a confidence level then you have to document your reasoning. If you can't do that then you cannot give a confidence level.

Members of the IPCC complained that dissenting opinions were ignored. The IAC agrees.

The biggest by critics of the IPCC is that it has become a lobbying organization and cooks the data in order to match preconceived results. The IAC acknowledges this in their final recommendation.

IPCC's slow and inadequate response to revelations of errors in the last assessment, as well as complaints that its leaders have gone beyond IPCC's mandate to be "policy relevant, not policy prescriptive" in their public comments, have made communications a critical issue.

I wonder what the fourth assessment report would have looked like had these reforms been in place all along? In all probability they would not have won a Nobel Peace Prize.