Friday, December 21, 2012

American taliban.

National Rifle Association Executive Director Wayne LaPierre really out-did himself this week. Speaking in response to the Newtown, Connecticut shooting, LaPierre concluded that armed guards in the schools were the answer. Like those old time liberals he so disdains, LaPierre's solution to mass murder in schools was to throw money at the problem, demanding that Congress "appropriate whatever is necessary to put armed police officers in every single school in this nation."

In the days leading up LaPierre public statement, the NRA announced that it was "prepared to offer meaningful contributions to help make sure this never happens again." As it turns out, LaPierre offered nothing meaningful in his statement, and the only contributions were those that he demanded come from Congress--which is to say from the rest of us. On the issues of assault weapons or background checks, LaPierre would give no ground. And where might the money come from? No doubt from other federal education dollars. Perhaps we could divert National Science Foundation funding for science and mathematics education to pay for armed school guards.

Better that he had kept his mouth shut.

In one week, the two major planks of the Republican Party have demonstrated later stages of rot. Even more than its anti-abortion stance, the Republican Party is bound to its anti-tax pledge and pro-gun commitments. And those two political shibboleths are enforced by the organizational and political skills of the two men who are their public personae: Americans for Tax Reform founder Grover Norquist and LaPierre.

On Thursday, House Republicans walked out on Speaker John Boehner and formally rebuffed his public suggestion that they might be prepared to make a meaningful contribution to the fiscal cliff negotiations. But like the NRA, the House Republicans were unmoved by the urgency of the moment. The anti-tax pledge of the Republican party was formulated a quarter century ago under the premise that denying revenue to government would necessarily result in smaller government. Starve the beast was the mantra, and shrinking the size of government was the objective. But Norquist and his acolytes misjudged the American public and the Republican Party itself. As much as Americans in general, and Republicans in particular, might dislike paying taxes, neither has shown any interest in shrinking the size of government.

Even as Republicans rail away at the evils of debt, they have shown a consistent willingness to drive the nation's borrowing ever upward rather than see any reductions in spending on the military or Medicare, the programs most dear to their constituents. Even the much vaunted Ryan budget approved by the House eschewed any specifics on where future cuts might come from, and if our national politics have shown nothing, it is that to demand reductions in spending without specifics is vacuous hubris.

Then on Friday, Wayne LaPierre's words made a mockery of any serious discussion of school safety. In truth, there was nothing new in the tragedy in Newtown. While MSNBC host and erstwhile presidential candidate Joe Scarborough made an impassioned plea that the Newtown murders change everything, in fact that tragedy simply brought home to white, suburban America the reality of the random and tragic murders of children that have become commonplace across urban America, where 20 children a month die from random gun violence.

For LaPierre to suggest the militarization of schools ignores the metal detectors and guards already commonplace in urban schools. And perhaps that was his point. Perhaps unlike the rest of the nation that has, like Scarborough, seen Newtown as a siren call for change, LaPierre knows well that cities have been fighting a losing battle with guns for decades without the political muster to take him on.  LaPierre knows well that there have been six mass shootings since Jared Lee Loughner shot Gabby Giffords two years ago, sparking calls for change. LaPierre will stand his ground, firm in the belief he need give no quarter, that the anger always subsides.

In their embrace of absolute doctrine without regard to the facts on the ground, the anti-tax and pro-gun movements have contributed to the undermining of democratic society. Both stances refuse dialog and disdain compromise. Taxes in America have declined steadily for the decades since Norquist came on the scene, and that is in large measure is doing. But Norquist and his movement utterly failed to wean Americans off of their reliance on and demand for public spending. Over the past decade alone, even as individual income taxes have declined by 25% as a share of GDP, the areas of public spending most dear to the Republican base--military and entitlements--have grown faster than any other, up 56% and 37% as a share of GDP. Rather than shrink the size of government, Norquist has cultivated a world of followers content to give less to even as they demand more from their government. He has essentially turned John Kennedy's notion of public citizenship on its head, and contributed to Americans becoming a meaner and more self-centered electorate.

Which would seem to be an abt description of the contribution that Wayne LaPierre has made. Like Norquist, LaPierre is an absolutist, and absolutism is necessarily destructive of open dialog and compromise in a diverse democratic society. Few in America challenge the basic right of gun ownership in America, it is a reality and distinctive aspect of American culture dating to the nation's founding. Yet the demands of the NRA that even the most moderate limitations on gun sales and ownership be assessed only as part of the slippery slope to "government taking our guns" makes a mockery of the issue. After all, if the slope has been slippery, it is sliding in the wrong direction. Assault weapons.  Semi-automatics with high-capacity magazines. Machine guns. Grenade launchers. Rocket propelled grenades. Depleted uranium bullets. These are not the arms envisioned by the founders.

For LaPierre to demand that the federal government fund armed guards in every school rather than simply engage in reasonable discussion of the ease with which any American can arm him or herself like a Navy Seal dropping into Abbottabad defies belief.

On the radio after the LaPierre statement, an NRA member suggested that what we really need is a list of mentally ill people circulated as a "do not sell" list to gun dealers. Really?

Mitt Romney may have lost the Presidency due to a campaign that ignored the evolving diversity of the American electorate. But the Republican Party risks losing its salience as a political party as its members increasingly prove themselves unwilling and unable to demonstrate that they are free thinking adults able to have real discourse on the real challenges that face the country.

The Republican Party has won control of the House of Representatives in large part due to years of paying systematic attention to the decennial redistricting as a path to electoral advantage. But anchored in its absolutist policies, and hearing only the voices of those within their circle, Republican leaders are at risk of mistaking that gerrymandered majority to be evidence of popular support for their leadership on issues. Over the years, in thrall of Norquist and LaPierre and the Tea Party, the GOP has steadily lost its own center. What was once the party of grownups--the party of fiscal prudence and sound judgement--is increasingly slipping down a slope of its own and becoming a party of outliers and extremists. If nothing changes--and this was the point of Scarborough's plea--it will push away many who identify themselves as Republicans, but who increasingly find their party lacking the seriousness of purpose necessary to lead the nation. 

A unique moment.

We must protect the middle class! The cry has gone out from Washington in the wake of the failure of John Boehner to pass his Plan B budget plan. House Republicans--whose votes are needed for any fiscal cliff resolution--have gone home for the holiday, yet somehow that is supposed to leave the problem to the President and the Senate. I am not sure I understand that logic.

For some reason, people are expressing shock and surprise that House Republicans got their backs up and refused to go along. What else were they to do? Washington is a place where legislators vote their political interest. Republicans for a quarter century have declined to vote for taxes, to remain true to their pledge. Democrats have voted for wars in fear of being labeled unpatriotic, and voted to deregulate the financial system in pursuit of campaign cash. Who since Congresswoman Marjorie Margolies-Mezvinsky has fallen on her sword for the team or the nation? This is how the game is played, don't point the finger at Republicans.

But many in Washington should embrace the prospect of no resolution to the fiscal cliff prior to the end of the year. For their part, true conservative Republicans who believe in balanced budgets should be excited at the prospect of the expiration of the Bush tax cuts and the mandatory spending cuts, all due to arrive with the new year. A quick glimpse at the website of the non-partisan Congressional Budget Office illustrates the projected impact of allowing those schedule changes to take place, and the dire consequences of continuing down the business-as-usual path we are on.

On the other side of the aisle, liberal Democrats should be gleeful to finally achieve the sunset of tax cuts that they long despised, along with substantial cuts in military spending. Come the new year, they will have a more Democratic Congress and be in a stronger position to negotiate budget amendments to their liking.

There should, therefore, be a strong constituency for doing nothing.

Just imagine, if Washington would just do nothing, all the years and years of wrangling over the long slide of our nation toward fiscal calamity would be over. Overnight, we would achieve a degree of fiscal balance that most Americans must have come to believe is not possible.

And all it takes is for Congress and the President to do nothing.

Overnight, we would achieve a new and fiscally balanced baseline. If there is to be tax reform, it can be done in a balanced and patient manner. If spending levels are to be restored, those decisions can be made against a backdrop where for the first time in decades, spending reductions have been made in a fair manner.

Many have been quick to quote the Congressional Budget Office report that suggests that if the fiscal cliff is not avoided, GDP growth will be 0.5% lower and unemployment will increase at the end of 2013, and the nation risks a slide back into recession. But this selective citing of that report ignores the larger message that suggests that doing nothing will lead to far healthier growth in the ensuing years.

"If the fiscal tightening was removed and the policies that are currently in effect were kept in place indefinitely, a continued surge in federal debt during the rest of this decade and beyond would raise the risk of a fiscal crisis (in which the government would lose the ability to borrow money at affordable interest rates) and would eventually reduce the nation’s output and income below what would occur if the fiscal tightening was allowed to take place as currently set by law."

The essential message of the CBO report is what any rational person would presume to be the case: We have become addicted to paying our way on borrowed money, and weaning ourselves off of that practice will involve some pain. The longer we wait, the more painful withdrawal will be.

Why do politicians and pundits ignore the CBO's larger message that we will all be better off if nothing is done? The urgent calls to protect the middle class mask the desire of many in Washington to have a bill at year end that can do many things for many interest groups. It is Christmas and lobbyists are working overtime to get their piece of the Christmas tree legislation they see coming to a vote before year end. Just as tax credits for low income Americans were the lubricant that assured the passage of the Bush tax cuts a decade ago, this year tax relief for the middle class is the cover for a wide range of interests. Would people really be surprised to wake up in January to realize that the fiscal cliff legislation passed in the dead of some late December night actually made our situation worse?

Meanwhile, the facts about tax rates are simply ignored in the calls to protect the middle class from an encroaching government. Yet the facts suggest that every quintile of Americans has seen their total average federal tax rate and average individual income tax rate decline steadily over the past quater century. For the lowest quintile of Americans the average tax rate has declined 89%, for the second quintile the decline has been 52%, for the third quintile 38%, for the fourth quintile 26%, and for the top quintile 3%. Only the top 5% of Americans have seen their overall tax rate rise over time. And, as candidate Romney pointed out, in the case of federal income taxes alone, the bottom two quintiles of Americans have negative income tax rates (due to tax credits), while the middle quintile average income tax rate of 1.3% in 2009 represented a decline of 80% over the past quarter century.

For 30 years, tax cuts have been justified on the basis of an imperative that we "grow our way" to fiscal balance, and give Americans back their money. But the data simply don't support the argument that middle class Americans are over-taxed. Over the past decade, spending may have grown substantially, with military spending and entitlement spending leading the way, up 56% and 37% as a share of GDP. But American taxpayers are have not paid for that spending, as income tax revenues have declined by 25% as a share of GDP over that same timeframe. If there is a disconnect, it is the belief on the part of Americans--nurtured by a self-serving political class--that they are not getting what they pay for. The facts suggest quite the opposite, across the range of discretionary and entitlement programs, Americans are getting a lot, and paying less and less for it every year.

If the clock runs out midnight December 31st and there is no resolution to the fiscal cliff, the nation will have the opportunity to reset the terms of the fiscal debate in Washington. The Bush tax cuts will be behind us and the budget ground rules will have changed.

We are at a unique moment. If our leaders in Washington fail to act, they may solve a problem that has vexed our polity for years.

Friday, November 16, 2012

Solving the fiscal cliff.

Our Congressional leaders all look like they have been fed castor oil, as they stand together trying to assure the nation that they will not let us go over the fiscal cliff. Nancy Pelosi summed up the sense of disconnect when she suggest that by Christmas, they should have a plan with clear timelines.

By Christmas? So they will have a plan by Christmas and it will be in place by New Years? I guess it is time to let the Pelosi grandkids know that the ski trip is off.

This should not be so hard. The fiscal cliff is nothing more than one more set of self-imposed deadlines that Congress put in place so that they could comply with their own rules. We have seen this before.

Gramm-Rudman-Hollins. Paygo. All sorts of rules that Congress tried to put on itself. Oh, yes, and the Bush tax cuts, that are the cause of all of this sturm und drang. Those tax cuts did not have to expire. Congress could have made them permanent at the time. But Congressional spending rules would not allow permanent tax cuts without Congress admitting to the public that it was breaking the bank. So--unwilling to face up to its own profligacy--Congress squeezed those tax cuts between the cracks by pretending that they would pay for themselves in the out-years after they expired.

But even as they were passing tax cuts with an expiration date to comply with their own rules, Republicans at the time boldly pronounced that they would fight to extend the tax cuts when they were scheduled to expire, and pillory Democrats for wanting to raise taxes if they tried to let them expire. And so they have. Even for Washington, DC, it has been a tour de force of political cynicism.

One way out of the current impasse--and I say impasse based upon the look on Mitch McConnell's face as he tried to utter the words "I will play nice," even as he imagined the beating he could get back home in Kentucky in two years when Rand Paul runs someone against him from the right--would be for Congress and the President to let go of their narrow objectives--just for a moment--and imagine what a collective package of changes might look like if they thought about the combined impact of the changes.

So, in the hope of getting Nancy onto the slopes with her grandkids after Christmas, and alleviating Mitch's evident distress, I offer the following package of reforms as a recommended starting point. Keep in mind that each side has constituents and the package as a whole has something for everyone. This is not rocket science, it is--as Bill Clinton would say--arithmetic.

1. Begin with the premise that the 2001 and 2003 Bush tax cuts have expired, as will happen soon in any event if Harry Reid and Mitch McConnell cannot get their mutual loathing under control. So the top tax rate is back up to 39%, capital gains taxes and dividends are taxed as ordinary income and the carried interest exemption introduced in 2003 is history. Income derived from labor and capital is taxed equally, and at a high rate. Calm down Republicans. Remember this is the starting point.

2. Because of these changes, tax rates would be increased by at least 10% for most people, and by an extraordinary amount for people like Mitt Romney who have just enjoyed had a ten year tax holiday that was never envisioned under the Reagan-era tax structure.

3. Introduce a cap on deductions as Mitt Romney suggested. A nice idea that prevents the need to eliminate any of the high-value deductions that each have strong lobbies supporting them and achieves the outcome preferred by Democrats of raising new revenue from the highest income earners, while Republicans would appreciate the fact that this reform would fall heaviest on high-tax, blue state voters. Based upon Tax Policy Center estimates, a $25,000 cap would raise over $1 trillion of new revenue, with 50% of that revenue coming from the top 1% of income earners. Combining the cap with an inflation adjustment would allow for the elimination of the AMT, an historically troublesome tax provision that was designed to have a similar effect.

4. You now have a far more progressive tax structure, theoretically producing significantly more income. So from that point cut nominal tax rates back across the board to a level that makes these changes revenue neutral. So far, we have accomplished two goals. We have reduced rates and we have increased the share of income paid by the top 2%.

5. To mollify the finance industry--and as the largest political contributors to Democrats and Republicans alike they have to be mollified--because of the elimination of the carried interest loophole and preferential treatment of investment income, we will modify Dodd-Frank--an enormously burdensome law that is killing small banks and financial entrepreneurship--essentially to have it apply only to those large firms that exceed a certain level of market share, such as 2% of consumer deposits or 2% of derivatives volume. The objective is to reverse the course of financial reforms that have been far too sweeping and instead refocus on the need to impose rigorous capital and regulator requirements on those firms that constitute systemic risks, while leaving others alone. Republicans will like this because it would reduce the regulatory burden on 99.5% of banks. Democrats will like this because it would focus regulatory efforts on the largest and most visible institutions and could ultimately induce stockholders to push for the breakup of larger institutions, which should be an objective in any case.

6. As dividends become treated as ordinary income, corporate tax rules should be changed to eliminate the double taxation of dividends. Eliminating the double taxation of dividends is an important step, but one that always should have been addressed at the corporate level rather than at the investor level. Democrats will scream, but this is the right thing to do to treat dividends on an equal footing with interest. I know, you have no idea what I am talking about, but suffice it to say that our recurring problem with corporate over-leveraging--dating back to the Michael Milken era and up to the 2008 financial crisis--has been consistently supported by a federal tax code that incentivizes the use of debt over equity in corporate capitalization.

7. And as long as Democrats are screaming, raise the estate tax threshold back up to a high level. Pick a number. $10 million? $20 million? Whatever. The point is that wealth should be taxed when it is earned, and the estate tax is an ineffective tool for wealth redistribution. It might feel good, but at the end of the day it does little more than that. Our objective should be to fix our fiscal problems, and then have the capacity to focus on ways to assure upward mobility and access to education as our way of leveling the playing field. Just look at the Bureau of Labor Statistics data, the unemployment rate for those with a bachelors degree is 3.8%; for those with some college or an associates degree it is 6.9%; for those with a high school degree it is 8.4%; and for those who did not make it out of high school it is 12.2%. Education and enhanced social mobility is essential to addressing income inequality, and the estate tax is simply a punitive palliative.

8. While the increase in the estate tax threshold would ease a burden on the wealthy, the next step takes back what was giveth. It is time to establish means-tested co-payments for Medicare. It is simply the right thing to do. As the data shows, Americans by and large pay for their social security benefits, and thus means testing is not necessarily equitable. On the other hand, Medicare contributions over one's lifetime pay only a fraction of the program cost. As such--and despite the illusion of many that Medicare is something they earned--Medicare is a general welfare program and it is reasonable and appropriate to skew the benefits on the basis of need.

9. This gets us to the payroll tax. That needs to remain in place. Washington must not continue down the road with the illusion of "pension holidays." If you want to give money to people to spend, have at it, that is what Washington does best. But the payroll tax pays for our social security and it is in everyone's interest to maintain the integrity of that system.

10. Finally, institute a carbon tax as a source of new revenue, and reduce income tax rates by one dollar for every two dollars raised. It is good public policy that Republican and Democrat economists can agree on.

The rest is just about jiggering the numbers to balance the costs and the benefits, but the pieces are there. Oh, yes, one more thing. The debt ceiling. It is time for a new law that ties budget approval to debt authorization. When Congress approves spending, it approves funding. There should be no disconnect between those two actions. There is no greater hypocrisy than listening to members of Congress who vote for spending and who vote for war and then turn around and pontificate about deficits and the debt ceiling. Time to end that charade.

So there it is. Crunch the numbers, run the traps, it works. For the President and Democrats, it increases the burden on the top 2%, and even within that cohort it is progressive. For Republicans, it reduces income tax rates, probably by at least 20%, and tackles our highest-cost entitlement. And for the country, it taxes things we don't want, while reducing the taxes and regulatory burdens on things we do want. It reduces the incentives to over-leveraging in the corporate sector and to concentration in the financial sector. There is something there for progressives, environmentalists, corporate America, and for a broad swath of the financial sector.

Hedge fund managers will not be happy, but they are rich, so they will get over it. Mitt Romney just told them they lost because Barack Obama gave things to everyone else but them. Now Nancy and Mitch and Harry get to do the same thing.

Tuesday, November 13, 2012

A letter to London.

My childhood friend Nick wrote from London last week about the apparent energy surrounding the American election. Here are pieces of my letter in response.

Election evening was an amazing experience really, as there were two very different visions of our nation on display. Bill O'Reilly, a pundit on the right, bemoaned the direction of the country as being dominated by an electorate that wants "stuff," but that was a shallow and ultimately puerile assessment. What we have seen is a steady transformation of the American electorate, from the black and white country of our youth to a far more complex place. 

The image of Chicago's McCormack Center was nothing less than stunning. Forty years after Dick Daley stood on the floor of the Democratic National Convention and yelled to Connecticut Senator Abe Ribicoff, speaking from the dais, "get out of my town you dirty Jew," the face of the American electorate has changed. The crowd this week was the defining image of what makes America exceptional. France has never integrated Algerians and other Africans that live in the ring suburbs around Paris into the French mainstream, but rather has forced upon them a meaning of what it is to be French. So too, Germany never embraced the presence of the Slav or myriad other migrants in their midst, and that cultural stress is one of the deep roots of the European crisis--to give up one's national identity is to lose one's bearings as a nation. 

Unless your national story is defined by the integration of immigrants, with the resulting social, political and and cultural change. 

And the challenges we face today are not the black and white challenges of our youth, but similarly richer and more complex. A second cast on what makes American exceptional is the gift of open trade and access to America's markets that has ultimately lifted up much of the world over the past fifty years. That is not the way colonial powers and hegemons are supposed to behave, they are supposed to plunder the periphery to the benefit of the homeland. But of course American capitalism prioritizes the return on equity over the return to the American homeland. As such, Democrats and Republicans alike could support a half-decade or more of free trade policies that uplifted the world, raised much of Asia out of destitute poverty, even as it eviscerated the American industrial heartland. Such is what it means to be an American. The world's gain was our loss, but at the same time the world's gain was also our gain.

If the sixties were a time of wrenching cultural change, we are now traversing a change in the face of the nation that is more profound. It is not about young white Americans breaking free of the morays of prior generations, while the civil rights and women's rights movements expanded the boundaries of freedom. It is instead about the steady integration of new Americans into the mainstream of society. As Asian Americans approach six percent of the population and Hispanic Americans seventeen percent, that growing immigrant citizenry brought the non-white share of the electorate up to thirty-five percent. In California, that percentage is now more than fifty percent, and as in many things, we are the harbinger of the nation's future.  

Our politics are overlaid across this evolving landscape. New York Times columnist David Brooks offered an interesting insight to Republicans this week. While the new emerging minorities--Hispanics and Asians--share many values that Republicans hold dear, including close family ties and a work ethic, they do not embrace the instinctive distrust of government that is so elemental to the modern Republican Party. The fact that these two groups voted over 70% for President Obama was not reflective of a desire for "stuff," but rather an embrace of an open society in which hard work is supported by a government that works to break down barriers to upward mobility, rather than one that protects entrenched interests and economic elites. 

And language matters. The Republican Party of our youth would have been a natural political home for many new Americans. That Party supported family values, economic opportunity, entrepreneurship and  celebrated America's unique role in the world. But since the Reagan Revolution, much of the rhetoric of the modern GOP has been openly hostile to non-white, non-male Americans. Reagan's imagery of the welfare queen became an icon of hostility to black America, and the paternalism of this year's campaign marked a significant regression from W.'s compassionate conservatism or Jack Kemp's big tent Republicanism.

This year, the rhetoric included self-deportation, an incredible slander that said to an entire community, "just leave." The preference of Republicans to castigate undocumented Americans ignores the intentional history of quiet, loosely patrolled borders that dates back at least to the 1986 Simpson-Mazzoli immigration reform that reflected a tacit compromise with an American business community starved for low cost labor wherein the federal government agreed to simply look the other way. 

And the Republican rhetoric of makers vs. takers divided society into false categories. The ultimate irony of Rick Santelli's famous rant about the bailout of American homeowners was that he stood on the floor of the Chicago Board of Trade and asked traders rhetorically if they want to pay someone else's mortgage. Santelli's rant was credited with marking the birth of the Tea Party movement, yet it ignored the fact that the entire financial industry had just received a bailout, estimated to cost the American public as much as $4 trillion. 

This is the same irony of seeing a parcel of hedge fund managers gathered at a fundraiser in Palm Beach as Mitt Romney preached about the unworthiness of 47% of Americans. Those hedge fund managers feed off of the balance sheets of the commercial banking sector as derivative counterparties and were every bit the beneficiaries of the bailout of the banks. Yet they preen themselves as masters of the universe, the makers of the new lexicon, and disdain the great unwashed whom they imagine would take what by devine right is theirs. 

For a ticket running on Paul Ryan's plan to eviscerate social programs, the makers vs. takers language was particularly ironic. As Charles Koch--one of the infamous Koch brothers--noted in his famous March 2011 op-ed in the Wall Street Journal, the federal budget has become a trough at which corporate America feeds, and in so doing they corrupt both our politics and themselves. The bank bailout and carried interest exemptions are just the beginning of what the finance industry  purchased for its $5 billion in contributions and lobbying spend over a decade or more, there are the special protections in the Dodd-Frank reforms, and those things that never took place. We did not break up the banks. We did not affect real derivatives reform. And yet despite the bailouts and the special protections, the largest banks show nothing but contempt.

Simply stated--and affirmed by Charles Koch--our largest American businesses have become a taker class. And that is the ultimate irony of John Boehner and other Congressional leaders with the maker vs. taker rubric. Those that Boehner hears from, like those in the dinner in Palm Beach, are those that give the money that lubricates the nation's capital. And what they get in return is a multiple of what they give, because as a class, Washington donors are keenly aware of the cost-benefit analysis of political contributions. There are few areas of investment that offer a better return than a well honed "government relations" strategy. 

The image of America on display last week was remarkable. Living in California, I have enormous optimism for the future of the country. The energy in the creative economies here is unbounded, as is the belief that we have only begun to imagine what is possible. The challenges here are enormous, beginning with how we continue to adapt our education systems to the multi-language environments of schools today. 

But this was a week that reminded the world about what makes America unique. The recognition that we continue to grow and and be renewed as a nation from the energy of those who arrive here. There is no condition to the participation of new citizens. They do not have to remove their head scarves or give up their own heritage. Instead, they participate in the manner of their choosing, and will contribute as co-equals to the shaping of our national future.

That is not necessarily easy for everyone to accept, but election night was a wake up call to many that it is a central reality of our country. Our country is a different place than it was forty years ago, and as difficult as the economic and other challenges might be, it was a reminder of how far we have come.

Sunday, November 11, 2012

Liberty for whom.

After an election in which 88% of Mitt Romney's vote was white, while 45% of Barack Obama'a vote was non-white, it is easy to conclude that the failure of the Romney campaign rested with the Republican Party's failure to adapt to changing national demographics. Perhaps that is true, yet there is little new in this assessment. Through the fall campaign, there was no expectation that Romney would approach W's 40% share of the Latino vote, and few paid attention to the Asian American community--the fastest growing minority group that now comprises 6% of the U.S. population--which voted Democrat in higher proportions than  any major group other than Black voters.

But Republicans did not expect women to turn on them. And yet they should have seen that coming.

In the final weeks of the race, both campaigns focused on the undecided women voters in swing states, and unlike any race in memory, issues of reproductive freedom emerged as a dominant issue. For years, Americans have been split on reproductive rights issues, but pro-choice women voters--a large share of that undecided vote--have traditionally be far less likely to have that issue move their vote than their pro-life counterparts.

But this year turned out to be different. Early on in the primary season, the controversy surrounding Virginia legislation requiring trans-vaginal ultrasounds in advance of legal abortions foreshadowed what was to come. By election day, two Tea Party senatorial candidates would see their campaigns fail largely on the basis of comments delving into their views on issues of rape and abortion, and arguably it was the patronizing, and to many misogynistic, tenor of Republican campaigns that cost them control of the U.S. Senate.

Polling--a science that has been vindicated by the election results--consistently indicated that women voters viewed Mitt Romney and the Republican Party as more competent overseers of economic affairs. As such, when the presidential race appeared to come down to making those undecided women in swing states choose between voting their views on the economy and threats to reproductive rights, that had all the appearances of being a winning hand for the Romney campaign. But that was not to be the case. Individual liberty, it seems, trumped economics.

Pro-choice women may not have voted on that basis historically in large part because Roe vs. Wade did not appear to be under threat. Yet the tenor of this year's election campaign brought issues of reproductive rights to the fore in blunt fashion, and by the end it was reasonable for any woman voter to conclude that in fact her personal liberty was very much under assault by organs of the state, and that there was a visible and rising tide that loomed to put harsher measures into law. In truth, for all the encroachments on individual liberty that might be evident in America today--and that are often decried by Republicans--it is hard to imagine a more fundamental threat to individual liberty than legislation telling a women what she may or may not do, or what procedures she must endure to exercise her legal rights.

If any single Republican should have anticipated that women would turn on Romney, it was Grover Norquist. Norquist, President of Americans for Tax Reform, knows better than most that threats to individual liberty are a powerful force in American politics, as the pursuit of individual liberty against encroaching state power has been the premise of Norquist's "center-right" coalition that has dominated Republican Party politics over the past three decades. The Norquist coalition has been premised on bringing together groups of voters who, in Norquist's words, want one thing from the central government--to be left alone.

Within the Norquist coalition, most voting groups--such as gun owners and home schoolers--are truly voting an interest of individual liberty. The pro-life and anti-gay groups are distinctly different, however. For those groups, the issues on which they are moved to vote are driven by religious beliefs, and unlike Norquist's statement, they do not want to be left alone, but rather to capture the power of the state to impose their own values views on the nation. The irony of the 2012 election is that the Republican Party may have foundered in large measure on the hypocrisy of one of its core principles: Female voters in swing states rejected a Republican Party that they otherwise might have supported specifically because of looming threats to their personal liberty.

If freedom and liberty are to remain the siren call of the Republican Party, the Party must account for its blindness to the question, liberty for whom? This year, centrist Americans whose vote could not be taken for granted by either party looked past pocketbook issues and voted their liberty interest and in support of the liberty interests of their fellow citizens. They voted against the candidate and political party they believed would better manage our economic future, and in every state where the rights of gay Americans were on the ballot, the outcome was an affirmation of personal liberty.

There is no certainty that the 2012 election will mark a pivotal realignment, as many suggest. Each party should take a lesson from the electorate. For Republicans, the message is that their now-decades old coalition is faltering in the face of its own hypocrisy. The party that was once the standard bearer of liberty has lost its way, captured by interest groups that would deny to others the liberty they themselves hold so dear.

For their part, Democrats now caught up in the hubris of victory should be aware that they have dodged a bullet. The electoral college landslide and three million vote margin in the national vote belied the closeness of the election, as a shift of only 120,000 votes in four states--a mere one eighth of one percent shift of the national vote--would have put Mitt Romney in the White House. The Democratic Party will not fare well in years to come as long as the majority of Americans continue to distrust its competence to manage of the national economy, as exit polls suggest. This year, liberty may have trumped economics, but that is not a formula that Democrats can rely on in elections to come.

Saturday, November 03, 2012

Betting on Silver.

The contrast is striking. Rush Limbaugh and Grover Norquist led the Republican band with surety and bravado. Not so much the Democrat masters of the universe, Nate Silver and Jon Stewart.

It is safe to say that some significant percentage of progressive partisans get most of their campaign news and analysis from these two nebbishy Jews who strutted their stuff a few weeks ago on the Daily Show. It is just one more aspect of the stratification of America as we recede into our gated communities--physical, digital and metaphorical--and see the world only through our own eyes. The right interprets reality through the lenses of Fox News, Rush Limbaugh and Scott Rasmussen. The left has MSNBC, Jon Stewart and Nate Silver.

Based on Silver's assessment, with three days to go, Barack Obama has an 84% chance of winning. Faced with an onslaught of Silver backlash from the left and the right of his opaque methodology, Silver sought to calm the waters with a sports analogy to appease the statistical illiterati.

Mr. Obama is not a sure thing, by any means. It is a close race. His chances of holding onto his Electoral College lead and converting it into another term are equivalent to the chances of an N.F.L. team winning when it leads by a field goal with three minutes left to play in the fourth quarter. There are plenty of things that could go wrong, and sometimes they will.

But it turns out that an N.F.L. team that leads by a field goal with three minutes left to go winds up winning the game 79 percent of the time. Those were Mr. Obama’s chances in the FiveThirtyEight forecast as of Wednesday: 79 percent.

If you are a Philadelphia Eagles fan, or perhaps a vintage Red Sox fan--or even worse, an Eagles and Red Sox fan--the logic of Silver's words suggest only one reasonable conclusion: Welcome to the White House President Romney.

But if Mitt Romney loses, there will be hell to pay in the Republican Party. From the beginning, Mitt Romney was scripted from central casting to be the Republican candidate in a general election. He survived a competitive primary season. He shook the etch-a-sketch as his campaign promised. He moved toward the center. But in the end, Mitt Romney will go down in history as the Republican candidate with the perfect resume who was unable to defeat a Black, liberal Democrat--still believed by nearly 20% of Americans to be a Muslim--presiding over the worst reelection circumstances since FDR in 1936.

In the end, Mitt Romney preferred for too long the campaign strategy of letting Obama's record be the defining question in the race, and never successfully established the rationale for his own leadership. He said he was better for jobs, but had no inclination to tell people what he would do, only that they must trust him to do it.

The failure of the Romney campaign should lead to fundamental questions about the structure of the Republican coalition. The modern Republican Party was birthed in the Goldwater campaign of 1964. It was given strategic direction in Richard Nixon's Southern Strategy that dislodged southern white voters from FDR's Democratic Party coalition. And it flowered under Ronald Reagan in 1976 and 1980 as the Republican Party coalition of today. Central to the modern Republican electoral strategy is the coalition of single issue voting groups, including anti-abortion, pro-gun, anti-tax, pro-faith, anti-gay voters conceived and driven by Grover Norquist, and the effective excommunication of the pro-choice, socially liberal wing of the Republican Party.

But the emergence of abortion as a dominant issue for swing voters and the nagging gender gap is an indicator of the larger failure of the President to make the case to swing voters that he understands the dynamics of the private economy and supports policies to enhance private sector job growth. While the Obama administration can claim credit for federal efforts to support the auto industry, Mitt Romney has built his campaign around the single message that the President has a deaf ear to the concerns of the private sector. The fact that Romney can say so little about what he actually would plan to do--to the extent of claiming in the famous 47% video that he actually would not have to do anything--speaks volumes about the President's failure in this regard.

In a grossly simplified schematic, the national electorate can be characterized around voter attitudes on both economic and social issues. This excludes a range of other subjects, such as foreign policy, but it is accepted as conventional wisdom that few voters cast their ballot based upon matters beyond our shores. A recent Gallup survey validated this view, as 0% of women and 2% of men indicated that foreign policy issues are important for them in this election.

As shown here, the dominant stance of the two political parties are in the opposite quadrants of the matrix. Democrats advocate liberal stances on economic and social policy matters, while Republicans choose the conservative stance on both. What is notable in the Gallup survey, is that while abortion ranks number one as the concern of women, at 39%, jobs ranks second at 19%. That the president has not been able to close the deal with swing state women has been directly attributable to Mitt Romney's greater credibility through much of the campaign on the issue of jobs.

And the President's struggles in this regard are well earned. The Republican Party convention built its theme around the President's famous you didn't build that remarks--that he himself derided at the Al Smith dinner. As much as Democrats might want to claim that the remarks are taken out of context, they fairly reflect an attitude toward private business that is pervasive in the Democratic Party. Democrats historically are disdainful of profit and hostile toward private industry, notwithstanding the reality that for most of America the private economy is the source of their income and target of their aspirations.

The President's singular focus on his struggle with Republicans over raising taxes on the wealthy obscures the larger reality that only a growing private economy will provide the ladder to economic opportunity that is critical to rebuilding the American middle class. Increasing taxes on the wealthy will do nothing to achieve the fundamental goals of growth, and little to ameliorate the growing income disparities across the economy.

The President's tin ear on what regulation can and cannot achieve is evident in his stump speech regarding Dodd-Frank banking regulation. The problem with Dodd-Frank is not that whether it labels large banks as too-big-to-fail, because too-big-to-fail is a market and political reality, not a creature of the Dodd-Frank legislation. Rather, the problem with Dodd-Frank is that in seeking to tighten regulatory rules on the dozen or so large financial institutions whose conduct was complicit in the global financial collapse, it has placed enormous burdens on thousands of other banks and financial firms that constitute no system threat to the nation. As the President continues to demagogue this issue, he demonstrates his own failure to parse the difference between JPMorganChase and the regional and community banks across the country that are critical to our economic recovery.

The fight for the swing voters in Ohio and elsewhere is fight to win the lower-right quadrant of voters who believe in individual liberty on social issues, and government restraint on economic issues. The irony for Republicans is that after finally killing off the last of the Rockefeller Republicans, their hopes for victory rest with a man who was an economic conservative and social liberal before he wasn't. To his credit--if that is the correct term--while Romney may be walking back his promotion of supply side tax cuts and reclaiming Obamacare, he has not recanted his newfound pro-life stance that was part of his political makeover as he cast aside his social tolerance in pursuit of his party's presidential nomination. For all we don't really know about what Mitt Romney believes, that lower left quadrant that is the center of the American electorate is part of his DNA.

For the President, fighting his way to the lower-right quadrant is more difficult, simply because he has never been there before. The irony is that Democrats have lost much of their liberal economic mojo over the years. Obama mentor and potential savior Bill Clinton began the march to the right when he wooed Wall Street with the promise of financial services deregulation and ended welfare as we knew it. Unlike the Clinton's, Obama is by all appearances a true believer, and swing voters take him at face value: they like him personally but do not believe that fixing a very broken private economy is his strong suit.

In Obama, voters may have someone whom they believe cares more about people like them, but who simply does not share many of their core views about what needs to be done to build the private economy. If Nate Silver is correct, it isn't going to be all about the economy this time. But finding their way back to the center of the American mainstream on economic matters will likely remain a challenge for the Democratic Party in elections to come.

Tuesday, October 30, 2012

Known unknowns.

The latest Rasmussen poll this week puts Mitt Romney up by two points in Ohio 50-48, calling attention to the tightening of the race. A brief scan of Real Clear Politics averages for twelve battleground states shows Mitt Romney leading in two, Florida and North Carolina, Virginia and Colorado tied, and President Obama leading in eight states.

Most notable, however, is that only in Minnesota is the President above 50%. In Michigan and Pennsylvania the President's lead is four points or more, but his number remains below 50%.

50% matters to an incumbent, because every election is first and foremost a referendum on the performance of the incumbent. It might have been Mitt Romney's strategy to make the race a referendum on Barack Obama, but it was not a new concept. And 50% matters to an incumbent because historical data suggests that voters who remain undecided voters through a campaign are not likely to support an incumbent in the end. This seems to be a fairly rational result when one thinks about it. If the incumbent had been able to close the sale, or if the challenger had made a persuasive case, a voter would not be undecided.

This historical tendency is important in assessing the state of the presidential race, and it suggests not only that the President's lead in swing states may be ephemeral, but that other states where the President is not at or over 50%, such as Pennsylvania or Michigan, may in fact be up in the air.

Faced with evidence of a tightening race, Democrat polster Stan Greenberg suggested in a blast email the same day as the Rasmussen Ohio poll that the polls are not accurately reflecting the electorate, as cellphone users are underrepresented. Obama advisor David Axelrod jumped on the poll-denier bandwagon a day earlier, suggesting that polling turnout models are flawed and fail to capture the Obama edge in the get-out-the-vote "ground game."

The unknowns as we head down to the wire are significant. If the ground game is not accurately taken into account, as Axelrod suggests, no doubt polling firms are struggling to account for the air war as well. The magnitude of media spending over the last weeks of the campaign is unprecedented, as we never seen the volume of spending and the magnitude of end game media that is underway in swing states.

A week ago, both campaigns turned up the heat on the abortion issue. Data from a recent Gallup survey   illustrated why, as it indicated that women in swing states list abortion as their most important voting issue, at double the importance of jobs or the economy. Clearly the Obama and Romney campaigns are seeing similar results in their data, as unlike any campaign in memory, presidential campaign ads are making their case specifically on the abortion issue.

Abortion is an interesting and historically asymmetrical issue in political campaigns. Over the past two decades, support for a woman's right to choose has split the electorate, with slightly more than half of those polled in support, and slightly less than half opposed. Yet historically, while abortion has been a highly partisan issue, Pew Research data indicates that as much as 73% of pro-life voters rank abortion as a very important voting issue, compared to 22% of pro-choice voters. That is to say that anti-choice voters are more than three times as likely to have that issue drive their vote.

This is not news for Republican activists, who have build the modern Republican strategy as a coalition of single issue voting groups, including anti-abortion, pro-gun, anti-tax, pro-faith, anti-gay voters. The power of this coalition, conceived and driven by Grover Norquist, is demonstrated by the effective excommunication of the pro-choice wing of the Republican Party. Norquist has built effective control of the Republican Party over the past two decades by understanding that what people say they care about matters far less in the political world than understanding those things that will predictably and reliably move peoples vote.

For those undecided women voters, both campaigns are making their final pitch on the basis of the economy vs. women's reproductive rights. Notwithstanding the Gallup data, the Obama campaign is fighting two historical trends when undecided women enter the voting both. They are hoping that more than 22% of pro-choice, undecided voters will vote on that issue, and they are hoping that undecided voters will not trend away from the incumbent.

Somehow, through an opaque alchemy of Monte Carlo simulations, New York Times polling guru Nate Silver considers all of this. He considers the ground game and the air war, factors in the incidence of cellphone usage, and the voting trends of undecided voters, when he projects that Obama has a 73% chance of winning. Yet all of the data suggests that each of the battleground states are within the margin of error, and in a year with significant unknowns--with the normal uncertainties that we know about combined with new uncertainties that we have never measured before--it is easy to conclude that we might know far less than we think we do.

Sunday, October 21, 2012

The road to Damascus.

According to recent polling data, barely 2% of Americans list foreign policy or matters beyond our shores as material to their vote, so one could reasonably ask why we have presidential debates on foreign policy at all. If presidential debates elevate style over substance as a rule, foreign policy debates elevate the form to kabuki theatre. Unlike the domestic policy arena, where there is some expectation that candidates will adhere to the positions they espouse, not only are candidates not expected to tell us what they would necessarily do in international negotiations, we do not really want them to. International relations and strategy are themselves built on deception, the last thing we want in our leaders is for them to show their cards in public, much less tell us how they would play them. Instead, we judge the candidates on toughness, clarity of purpose, and other such ephemeral notions of what it takes to be Commander-in-Chief.

In the final presidential debate, on foreign policy, one can expect Mitt Romney to come down hard on the Obama administration for its failure to project American power in the Middle East. This has been an encapsulating critique, particularly with respect to the President's failure to rein in the Iranian nuclear program. Pressing for tougher action on Iran--without actually suggesting what that action would be--has been a trifecta of sorts for Romney. First and formost, Iran's continued enrichment of uranium in the face of American opposition had provided the prima facie case of the fecklessness of administration policy. Second, tough rhetoric on the Iranian threat to the survival of Israel ties in to Romney's courting of Jewish and evangelical support. And finally, Iranian aggressiveness within the region frames Romney's perspective on the Syrian conflict, wherein we not only have failed to arm the rebels, but we have done nothing to impede Iranian material support to the Assad government.

The challenge for Romney is that even as he advocates for a more muscular projection of American power in the world, he cannot beat the drums too loudly. Iran, in particular, has always held risks for Romney, lest his aggressive rhetoric leave the electorate with the sense that his team--populated as it is by former W. neocon hands--would lead us once again down the path to war. There is little appetite for a new war across the American electorate, as Republicans and Democrats alike have come to doubt the effectiveness of our war policies of the past decade. Romney's attack must parse the question of what he would do differently, even as he avoids rhetoric that might imply moving down the slippery slope toward putting American boots once again on the ground in a hostile Muslim land.

The civil war in Syria presents a far more complex situation, and one that will als be a front-burner issue for the next president. But unlike Iran, the Syrian conflict is one in which the strategic American interest remains unclear, even as the calls for more substantive American action grows. It is a conflict of multiple dimensions, with myriad parties, each with their own strategic interests. At this point, at least four distinct dimensions to the conflict have emerged.

First, there is the Syrian civil war, where a coalition of secular and Islamist groups have embraced their own version of the Arab Spring, seeking to wrest control of their country from Bashar al-Assad and his regime. The Obama administration has stepped very gingerly into that conflict--much to the chagrine of some administration opponents. We have put down our marker by demanding that Assad go, but we have stopped short of providing arms to the rebels. The rebel coalition has no defined political agenda upon which they agree, and accordingly we have declined to arm the collective rebel movement, concerned that the Sunni insurgency we arm today may well become the adversary we fight tomorrow.

At the next level, the Syrian conflict has morphed into a regional Shia-Sunni conflict. Our Arab allies, primarily the Sunni regimes in Saudi Arabia and Qatar, are arming the rebels in our stead. But those arms are largely flowing to Sunni Islamist groups within the rebel coalition. Other support for the rebel coalition is coming from Turkey--long a dominant Sunni power--as well as al Qaeda and Iraqi Sunni militant groups. On the other side, support for the Syrian Alawite regime is coming from Shia state and non-state actors including Iran, Lebanon's Hezbollah and elements of the Iraqi Shia-led government.

On the regional level, the Syrian conflict has become the first context for the re-emergence of the three-way battle for regional power among the historically dominant countries within the region: Turkey, Iran and Egypt. Those three countries have each had their historical millenia of regional dominance, and each take great pride in their rightful roles as regional powers. With the new emergence of Egypt under Muhammed Morsi, and Turkey's turn away from Europe back to the Middle East, we are beginning to see those three countries asserting themselves in the region--and against each other.

And finally there is the level of super-power politics. Russia--long sidelined as a global power--has made clear that it is not prepared to give up on its historical ally in Damascus. A decade ago, Vladimir Putin sought western recognition of Russia's role as a regional hegemon over the states of the old Soviet Union. But we rebuffed Putin's overture, and instead pushed the expansion of NATO to Russia's doorstep. And now, if for nothing other than pride and a bit of payback, Russia is going to make every effort not to be subsumed to America's dictates in the region.

So far, while Mitt Romney has criticized the Obama administration for "leading from behind" in Syria, neither he nor the President have articulated what strategic interest is at stake for the United States in that conflict--beyond our interest in avoiding a regional conflagration. Arguably, it is our lack of expressed strategic interest that has allowed all of the other parties to step into the conflict, believing that they can pursue their own interests there without provoking a response from us. Yet it is exactly that escalation, and the ensuing chaos, that could well trigger American involvement on the ground.

After a decade of wars in the region, with thousands dead and a trillion dollars spent, we need a good debate on foreign policy. As the dynamics in Syria indicated, foreign policy is becoming increasingly complex, and the projection of power alone may no longer suffice to bend nations to our will. The candidates may not have clear answers to the challenges we face, but at least we need to understand how they think about the questions. And if we are doomed to become more deeply involved in the conflict in Syria, we need to hear from the candidates how they define our strategic interest in the region, and what they imagine a successful outcome might be that would warrant our involvement on the ground. We have seen this movie before, and need to know why we should expect a different ending next time.

Sunday, September 30, 2012

You can't go home again.

Rush Limbaugh lost it last week. After a spate of polls suggested that Mitt Romney was losing ground in his presidential campaign, Limbaugh pronounced rampant poll bias to be nothing less than an organized voter suppression conspiracy.

To his credit, it had been a bad week, and while Republican pundits were turning their fire from Obama to their own nominee, El Rushbo was working to rally the troops. Limbaugh has long been the heart and soul of the Republican Party, and almost single handedly lifted the party out of its deep stupor with his CPAC speech in the wake of Barack Obama's victory in 2008.

The failure of the Romney campaign is spreading to the hinterlands. Perhaps an unintended consequence of running a campaign based on being Not Obama, the Republican standard bearer has left the party without a clear, defining case against Democrats on down ballot races. The lack of a defining, pro-growth Republican message has left their senate candidates with a serious message gap, from Massachusetts, where Scott Brown has been left to argue whether Elizabeth Warren looks like an American Indian, to Montana, where the rap against Jon Tester is whether he is Montana enough.

Over the past week, Romney has seemingly walked back his stance on two positions that have been among the central rationales for his campaign: The repeal of Obamacare and tax cuts. Standing before a candidate forum sponsored by Univision--the Hispanic focused media company--Romney embraced his role as the "Grandfather of Obamacare." As if to double down on the doubt his remarks would foment in the minds of conservatives,  Romney was quick to point out that he did not embrace credit for Obamacare during the primaries, as "we thought it might not be helpful."

Then, speaking in Ohio a few days later, Romney tempered his tax cut promises as he emphasized that he was proposing to cut tax rates, but that would not necessarily translate into reductions in individual tax liabilities. This was not news for those who were paying attention, as he has always insisted that he intended to reduce deductions and exemptions to maintain both the revenues and progressivity of the current tax code. But for conservatives with visions of Ronald Reagan and Jude Wanniski dancing in their heads, Romney's words were apostasy.

The Mitt Romney that poked his head out of the ground last week was not the Mitt Romney that Republican activists presumed that they nominated. Like one whose polyjuice potion was wearing off, we saw glimpses once again of the Romney that once was--and that Romney's primary opponents long warned against. He showed evident pride in the universal healthcare program he created as Governor of Massachusetts, and he spoke the truth about his view on taxes, which is that he believes in the urgency of tax reform and simplification, but is not a supply sider who advocates tax cuts without regard to fiscal consequences.

Throughout this political season, observers have sought to find the recent presidential campaign that could provide an analogy to this one. Romney supporters have long clung to the notion of 1980 as the preferred analogy, when Ronald Reagan surged ahead late to defeat an incumbent Jimmy Carter who failed to lift the national economy. Others have pointed to the 2004 Bush-Kerry contest, where a flip-flopping challenger failed to gain the credibility to mount an effective challenge.

But 1988 may provide a more apt analogy. That year, the challenger Michael Dukakis led George H.W. Bush through most of the summer, before Bush stormed to the lead for good by September. The key to the Bush victory was its success in defining Dukakis as a weak leader whose liberalism trumped his judgement. The campaign marked the apotheosis of political strategist Lee Atwater, whose Willie Horton ad was the defining tactic of that campaign.

Defining one's opponent in presidential contests is a long-cherished, and bi-partisan strategy. Years before Atwater succeeded in making Willie Horton into Michael Dukakis' running mate, Lyndon Johnson used the ad Daisy to undermine Barry Goldwater's leadership credentials. This year, the Obama campaign gained the upper hand on the Romney campaign through with an ad campaign over the summer targeting the battleground states. Those ads successfully redefined Romney from a man who in Bill Clinton's words had a "sterling business career" to a Gordon Gekko character.

But reframing efforts only succeed when they ring true, when they touch a nerve in the mind of the electorate about the target candidate. The Johnson campaign juxtaposition of the girl picking daisies against a nuclear explosion played upon Goldwater's famous remarks in his nomination acceptance speech that "extremism in defense of liberty is no vice." Similarly, Dukakis made good on the caricature painted of him by Atwater, most famously in his unemotional response to a debate question about the rape and murder of his wife. In Romney's case, the Obama campaign caricature of him blossomed in response to Romney's own words in the 47% video.

Somehow it seems fitting that the Obama campaign gained the upper hand through harsh--and in the view of some inaccurate--attack ads. After all, Obama has endured relentless attacks on his character and his legitimacy as president. But it may be that the continued assaults of the birthers ultimately undermined the credibility of other attacks on the President that might otherwise have done greater damage. In any event, if the best the Romney campaign could come up with was a fifteen year-old video of Barack Obama confessing to believe in the redistribution of wealth, they clearly left their most effective material on the cutting room floor.

Yet what is most remarkable is that for all the apparent deficiencies of the Romney campaign, Romney is only five points down in the latest Gallup tracking poll of registered voters, and just over one week ago the race was a dead heat. The change this past week that got Limbaugh and others unglued was in the battleground states where Obama appears to have put some distance between Romney and himself.

It remains to be seen how the debates affect the last weeks of the campaign. It is conceivable that Romney could yet find himself and break out of the bizarre trap he has found himself in between who he is and the persona he sold to win the nomination. In 1988, Michael Dukakis ultimately threw away his script in the closing weeks of the campaign, and became himself, and in the closing weeks of the campaign he closed the gap. If the past week is any indication, Mitt Romney is chomping at the bit to tell us who he really is. And the media, which always loves a new story line, would embrace a new/old Romney, and would suddenly point out the flaws in the President that to date they have preferred to ignore.

But it would be a tougher journey for Romney than it was to for the earlier Massachusetts governor. Unlike Dukakis, whose populist rhetoric in the end stage of his campaign marked a return to the warm embrace of the Democrat base, Romney would have to take the harder step of abandoning the base--who always knew he was not one of them--and move toward the foreign and deeply reviled land of the political center.

It might be where he belongs, it might be where he is comfortable, but there is no going back now. If Mitt Romney tries to reverse course now, the rage from his party will be titanic, because, as Barry Goldwater might have said, moderation in pursuit of victory is no virtue.

Published on The Huffington Post on October 1, 2012

Tuesday, September 25, 2012

Mitt's angry white guys.

Since the onset of the 2008 recession, the political landscape has become increasingly riven by resentments grounded in the distribution of income and taxation. Romney's videotaped remarks at a fundraiser in Florida reflected resentments among many wealthy taxpayers that a smaller and smaller percentage of Americans are bearing a burden of citizenship--paying the federal income tax--that they believe should be born more widely. On the other side, the Occupy movement has been largely motivated by the increasing concentration of wealth and income in the United States since 1980, as the income share of the top 1% had more than doubled from 8.9% to 19% of national income by the time of the 2008 collapse.

Over the past several decades, the federal income tax system has become increasingly progressive and the share of total income taxes by wealthier households has grown steadily. During that same timeframe, changes in the structure of social policies--largely motivated by Republican aversion to traditional social welfare programs--have resulted in the increased the use of refundable tax credits as a means to ameliorating poverty among the elderly and providing support to poor families with children.

As the public deconstruction of the 47% number showed in the wake of Romney's remarks, half of the 47% of non-tax-payers are the elderly and low income working families with children whose income tax liabilities were offset by such tax credits, while the other half constituted households with aggregate incomes in the mid-$20,000 range or below who had no tax liability due to standard deductions, but who do pay the payroll tax.

Republican strategists were quick to point out the fatuity of Romney's remarks. As the conservative Tax Foundation has noted, the incidence of non-payers is highest in the deep-red states of the old Confederacy, and whether they appear under the guise of Spiro Agnew's silent majorityReagan Democrats, Pat Buchanan's peasants with pitchforks or Lindsey Graham's angry white guys, lower income and elderly whites have long constituted an important part of the GOP base.

But worse than just stepping on his own base, Romney stood before that group of big ticket donors and affirmed their contempt for a large swath of their fellow citizens. Lost was the notion that the contributions of citizenship are not and should not be just measured in dollars. To put it bluntly, lost was the fact that while lower income families may pay a smaller share of the income tax, they bear the burden of citizenship in a more elemental way: their children serve in the military in a far greater percentage than the children of large political donors and taxpayers. People contribute and people serve their country in myriad ways, and wealth is not an entitlement to arrogance.

This past July, the Congressional Budget Office issued a report that pronounced that "average before-tax income for all households fell 12% from 2007 to 2009." The report data suggested that average American family incomes plummeted in real terms to 1998 levels, and contributed to the post-2008 narrative of America's lost decade.

Like the deconstruction of Romney's 47% number, a closer look at the CBO data suggests a startlingly different picture. Rather than a broad based decline in household incomes across income groups, the data indicates that on average poor families saw no income declines, and 80% of American households were largely insulated from significant income declines .

Specifically, for the poorest families--those in the lowest quintile of income groups--real, after-tax incomes actually rose from 2007 to 2009, while for the middle 60% of households, household after-tax incomes declined by 1% to 2% from 2007 to 2009. Accordingly, in contrast to the lost decade narrative, 80% of American households saw their income decline only modestly, if at all, from 2007 to 2009. In contrast to seeing their income set back by a decade, the CBO data suggests that after-tax incomes of the poorest households were unaffected by the financial collapse, while incomes for the middle 60% of American households were only set back to 2006 or 2007 levels.

The 12% aggregate decline in household incomes, it turns out, was largely a product of income declines in the top fifth of households, and even within that top quintile the declines were concentrated at the top. The bottom half of the top quintile--families in the 81st to 90th percentiles--saw their incomes decline by 2% and those in the 91st to 95th by 4%. Even the 96th to 99th percentiles just equaled the overall average rate of income decline of 13% from 2007 to 2009.

The bulk of the decline came where the bulk of the income resides--in the top 1% of households--that saw an after-tax decline in income of 37%.

This data tells a story that is quite different from the one that made the headlines. Just as Romney's 47% number is not evidence of a massive breakdown of society, the 12% average decline in household incomes in the wake of the 2008 collapse may not actually be the evidence of a widespread collapse in family incomes which has become the generally accepted narrative of the impact of the 2008 recession. The larger issue of the concentration of wealth in America has not gone away, but with respect to the specific impact of the 2008 recession, the underlying data suggests that our counter-cyclical policy systems designed to cushion families from economic adversity--such as unemployment insurance and the earned income tax credit--have worked.

The data suggests that the top 5% of households--and really the top 1%--have not gotten away scot-free, but rather they have born the brunt of the economic fallout from the 2008 recession, while the middle class and the working class have been insulated to a far greater degree than has been widely recognized.

Maybe they just want someone to say thank you.

Tuesday, September 18, 2012

Self-inflicted wounds.

This is an amazing campaign moment. Somehow, Mitt Romney found himself at a dinner of wealthy financiers with a video camera perched on a side table. The film is remarkable in the candid nature of Mitt Romney's comments. For example, he views Middle East peace as an impossible objective and he suggested that his objective would be just to "kick the can down the field and hope that ultimately, somehow, something will happen and resolve it."

But most remarkable is the utter disdain Mitt Romney's remarks show for the working poor in America. By now, many have read or heard the most widely disseminated quote, but it bears repeating here.

"There are 47% of the people who will vote for the president no matter what. All right, there are 47%  who are with him, who are dependent upon government, who believe that they are victims, who believe the government is responsible for them, who believe they are entitled to health care, to food, to housing, to you-name-it. That that's an entitlement. And the government should give it to them. And they will vote for this president no matter what... These are people who pay no income tax... my job is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives."

Romney's remarks conflate two very different data points. The first is the observation that 47% of the electorate have made up their mind to vote for Obama. Romney's figure of 47% is a bit higher than the number one can infer from the September 9th Washington Post-ABC poll. That poll suggests that 49% of Americans are leaning toward Obama, and 86% of that cohort have made up their mind. Therefore, based on that poll, 86% of 49%, or 43%, have made up their mind. 43% is a bit less than Romney's 47%, but the difference is, as they say, in the margin of error.

Second, Romney then conflates that 47% with the frequently cited figure from the Tax Policy Center that 47% of American households do not pay income taxes (the Tax Policy Center figure was actually 46%) and suggests that these are the same people.

The Tax Policy Center study that suggests that 46% of Americans do not pay federal income taxes has become the basis conservative outrage and demands for tax reform arguments for "broadening the tax base." The Tax Policy Center data, however, paints a somewhat different picture than the conclusions that have been reached in the public imagination and mirrored in Romney's remarks that somehow there is massive tax avoidance or inequity. Of the 46%, roughly half--or 23% of households--do not pay income taxes because their household income is below the minimum threshold--approximately $26,400 for a couple with two children--that would result in an income tax liability.

Based on Census data, the upper limit of the lowest quintile of household income distribution in the United States was $20,262 in 2011, so an income of $26,400 would place a family in the lower range of the second lowest quintile of family income distribution in the country. At that level, the Tax Policy Center research points out, standard deduction of $11,600 and four exemptions of $3,700 each eliminates their income tax liability. This half of the non-tax paying households, the Tax Policy Center research points out, pay no income because they do not earn enough money and would pay no taxes even if all tax expenditures were repealed.

The other half of the households that did not pay federal income tax--comprising 23% of overall household units--were recipients of tax expenditures that offset their income tax liabilities. Of that 23%, three quarters had their federal tax liabilities offset by tax credits for the elderly (44%) and tax credits for children and the working poor (30%), tax credits supported by Democrats and Republicans to ameliorate poverty in America.

Accordingly, based on the Tax Policy Center analysis, all but approximately 6% of households that pay no income taxes do so because they are working poor and elderly whose tax obligation is offset by standard deductions and targeted tax credits.

Setting aside the disdain for the poor and the elderly betrayed by Romney's remarks--and the words in the video are actually harsher in tone than the words themselves--the conflation of the 47% who support Obama and the 47% who don't pay taxes was noteworthy. Democrats have wondered for years about the share of the working poor who consistently vote Republican--and who do not pay federal income taxes for the same reason as the working poor who vote Democrat. Yet in his remarks, Romney seems to suggest that the entire 47% who do not pay federal income taxes are lost to him.

But that is not the case. Gallup weekly tracking polls suggest that lower-income Americans have favored Obama by roughly 53% to 38% over the course of the campaign. That is to say that a large measure of those who have been written off by the Republican candidate are actually supporters. After all, as the Tax Foundation points out, the deep-red southern states have the highest percentage of "non-payers." The gap Romney faces among the working poor is notably smaller than the deficit that Romney faces among younger voters (56/34) or than the deficit Obama faces among highly religious voters (36/57). 

Seeing Romney caught on camera at a fundraiser inevitably harkened back to Barack Obama's famously taped words regarding his difficulty reaching voters in economically depressed communities:

"And they fell through the Clinton Administration, and the Bush Administration, and each successive administration has said that somehow these communities are gonna regenerate and they have not. And it's not surprising then they get bitter, they cling to guns or religion or antipathy to people who aren't like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustration."

Obama's remarks were notable in the paternalism demonstrated before an audience of wealthy Californians, and suggesting a sociologist's distance from the plight of the embittered masses. But on a substantive level, Obama's observation mirrored the analysis underpinning the political strategy designed by Grover Norquist, which has become the foundation of the modern Republican Party that Romney hopes to lead. What Obama saw as groups clinging to guns, to religion and to different forms of xenophobia, Norquist reframed as groups whose votes would be moved by one of those single issues--pro-gun, pro-faith, anti-gay, anti-immigrant. From that insight, Norquist has built a dominant political force, and the working poor are an essential part of that coalition.

Where Norquist saw unique differences that matter, differences to which one can appeal regardless of income level, Romney seems to see only the undifferentiated poor, entitled masses yearning to be Democrats, and he has nothing but disdain for their plight. In Romney's self-proclaimed journey from moderate blue-state Republican to severe Republican, he seems to have lost sight of the rich complexity--to say nothing of the fundamental decency--of the American electorate. Where are the words to inspire faith in upward mobility that is the core of the American dream and of political leaders? As with his comments on the challenge of Middle East peace, Romney appears to have written off the problem of poverty in America.

As he has pursued a campaign strategy that lacks a positive message beyond I am not Barack Obama, one of Romney's problems is that people still do not know who he is. This leaves him vulnerable to having this video define him. But the greatest problem this video presents for Romney is not with undecided voters, but within the Republican Party itself. Romney's words of disdain for working Americans--particularly spoken with such contempt--are so at odds with the inspiring optimism that for the party faithful was the hallmark of Ronald Reagan.

That optimism and faith in the American dream--however more distant that dream may have become--has been central to the success of the Republican Party, much to the chagrin of Democrats, in garnering broad support from Americans across income groups. In casting aside 47% of the country--particularly in a room of fellow plutocrats--Romney has realized the worst fears of many in the Republican Party. Weekly Standard senior writer Stephen Hayes said it best when he suggested that if Romney really believes "those people" to be so totally irredeemable, he should not be running for president.

Saturday, September 15, 2012

I'm not the other guy.

Republican pundits are beside themselves. Mitt Romney's core election strategy has been built around the observation that no incumbent since Roosevelt has been reelected when the unemployment rate is over 8%. The parallels are drawn to the Reagan-Carter campaign, and the presumption has been that if the election can be framed as a referendum on the economy--and more specifically Obama's handling of the economy--then Romney must win.

Week after week, the headlines speak to continued economic stagnation, and the news of the past week has been particularly grave. First there was the jobs report that showed continued shrinking of the labor force, as almost four times as many people stopped looking for work as found jobs. Then there was the Census Bureau report this week on income and poverty in the United States that showed growing poverty and continuing deterioration in middle class incomes. And finally, as if to put a fine point on the fact that our crisis is not abating, the Federal Reserve Bank launched a new round of quantitative easing--Fed-speak for radical measures to further reduce long-term interest rates toward zero--in the hope that lower rates will inflate stocks and other asset prices, and ultimately stimulate economic activity by boosting investor and consumer confidence.

How is it, then, Republican pundits are asking, that Mitt Romney can lose ground in his campaign bid even as the economic news gets worse. George Will voiced Republican anxieties last Sunday following the Democrat convention and the ensuing negative jobs report when he suggested that "If the Republican Party cannot win in this environment, it has to get out of politics and find another business." And in the days since Will voiced his concern, Romney has seen his the odds on his winning the White House decline from 43% to 33% on Intrade.

Part of Romney's problem may be that while there is a case to be made against Obama on the management of the economy, Romney has not made it. For example, while Romney has advocated for tax simplification, he has not explained why a flatter tax rate with fewer deductions would be more efficient and promote greater economic growth. Similarly, Romney has argued for tax cuts in lieu of government spending as a means of stimulating the economy, but has failed to explain why tax cuts in an environment of deeply depressed private sector demand would have led to a better outcome. Instead, Romney has continued to place the focus on Obama's performance, in the hope of an up or down vote on that record.

In their seminal book, This Time Is Different: Eight Centuries of Financial FollyHarvard economists Carmen Reinhart and Ken Rogoff provide extensive data on the recovery time from financial crises with similar attributes to the 2008 collapse. They describe the patterns of events and the rationale for policy responses in detail, and their data suggests that the 2008 collapse is far from unique. Among other things their data on modern financial crises indicates that on average unemployment continues to increase for five years after the original collapse, housing values decline for six years and fall by 35.5%, that national debt nearly doubles in three years, and the restoration of employment and economic growth to pre-crisis levels takes seven to ten years.

Against that backdrop, the electorate seems to be placing the burden on Romney to articulate what his economic policies actually would be and why they would lead to a materially different outcome than the course we are now on. The Washington Post-ABC News poll released last week painted a picture of a country divided nearly 50-50 on almost every question, but one response that stood out: 63% of those polled believed that Romney has not provided enough details on policies he would pursue as President. This suggested that the strategy of simply being the anti-Obama candidate might not be not enough, people want to know what a Romney presidency would look like.

This week, barely a week after the Democrats left Charlotte, the ground under the presidential campaign shifted dramatically. As bad as the economic news was, it has been overwhelmed by the killing of American Ambassador Chris Stevens and three others in Benghazi, Libya, and the ensuing turmoil across the Muslim world as outrage over a YouTube video exploded from Tunisia to Indonesia. Ironically, there was little discussion of foreign policy in the recent political conventions, and there has been remarkably little debate--among the candidates or their surrogates--about U.S. options and policies across the extraordinary range of global issues that have made headlines just this week: U.S. relations with the evolving "democracies" in the Arab world. Our relationship with Egypt and the Muslim Brotherhood. The emerging Sunni-Shia war in Syria. The strategic interests of Russia and China in the Middle East and South Asia. Pakistan. Afghanistan. The looming disintegration of the European common currency.

Democrats and their allies in the media--and no small number of Republicans--jumped all over Mitt Romney for his hasty comments about events in Libya this week. It may well be that Obama's snarky comments in his convention speech about Romney's lack of experience in foreign policy got under his skin, and Romney's Libya comments may have been driven by the anti-Obama persona that he has taken on, but Romney's comments pointed to a larger issue that underscores many of the foreign policy issues noted above. The United States has spent more than a decade now with troops on the ground battling in Muslim lands, and we are now leaving. The decision by Iraq's Shia Prime Minister Nouri al-Maliki to allow Iran to use Iraqi airspace to deliver weapons to the Assad regime in Syria over our objections highlighted our waning influence in that region of the world where we have invested so much, as ancient loyalties and enmities increasingly trump the willingness of local leaders and allies to accede to our demands.

We have seen the YouTube incident before--The Satanic Verses, the Danish cartoons, and other episodes--where Western freedom to insult violates Koranic precepts. And as in those earlier cases, much of the clashes this week seemed highly orchestrated. The protests were launched on September 11th, protestors arrived with al Qaeda flags in hand, and some remembered to bring their RPGs. It is hard to imagine that a search of the 120 million videos on YouTube would not yield other comparably offensive material, but this one was chosen by someone to achieve their own political objectives. This was not a random event.

But the larger question is what one is to do about it. While John McCain made the case that the turmoil was exacerbated by our scaling down of our presence in the region, he did not go so far as to advocate for expanding our presence on the ground. It is also notable that while some Romney partisans rushed to make the case that this was one more Obama failure, Romney advisor and George W. Bush CIA chief Michael Hayden offered a more measured assessment"I wouldn't call it a failed policy at all. We shouldn't presume that we can control events in this part of the world."

While the United States has been the apparent target of Muslim protests, these protests are as much a challenge by Salafist Islamists to the new, relatively moderate elected regimes, no doubt with al Qaeda support if not orchestration. Accordingly, the actions by those governments to quell protests and defend our embassies are as much about defending their nascent democracies as about defending us, that is to say it was not about our values, it was about their politics. And if that is the case, we should see in that turmoil a triumph of sorts, it is a sign of people owning their own future.

These protests are evidence of an instability growing out of our withdrawal from the region, but rather are an outgrowth of political change that our presence engendered. The irony of Romney's remarks is that these protests can be seen as a triumph of the Neoconservative policies in the region and the determination to topple Saddam Hussein. The goal of that policy was to create one democracy in the region, and in doing so to whet the appetite of others for similar change.

In that regard, despite Romney's urge to decry the protests as the evidence of policy failure, he should instead laud them as evidence of policy success, and recall Paul Wolfowitz comments in his 2003 interview in Vanity Fair"There is no question that there's a lot of instability that comes with democracy and it's the nature of the beast that it's turbulent and uncertain."

The Muslim protests offered Romney a chance to claim a singular Republican triumph, but driven by his anti-Obama imperative he has lost the ability to step back and look at the larger picture. Much as Democrats would deny it, the sweep of history in the Arab world is on a positive trajectory. This week, we watched the elected Egyptian government led by the Muslim Brotherhood quell protestors at our embassy and denounce the efforts of al Qaeda and others to undermine democratic change. That is a triumph.

Perhaps if the election were a referendum on the economy, Obama would lose, perhaps not. But in focusing on the Carter-Reagan contest, Republicans strategists seem to have lost sight of the enormous impact of the Iranian hostage crisis on that election. It may be that the unemployment rate does not tell the whole story, and that Americans understand that we are in the middle of a long recovery. In the same vein, it may be that all riots in Muslim cities are not the same. Sometimes they are evidence of policy failure, and sometimes they might be indicators of change, even success.

In either event, perhaps George Will should give voters more credit, and the cause of Mitt Romney's failure to gain ground is a strategy that is built around saying as little as possible and hoping that will suffice. But as Paul Wolfowitz suggested, this is a world of turbulence and uncertainty, and it just may be that voters are interested in seeing whether a future president can manage that complexity with subtlety, and whether he has more to say than just I'm not the other guy.

Posted by David Paul on The Huffington Post