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