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.