Wednesday, October 23, 2013

The anger of the Al Sa'ud.

There is something oddly satisfying about seeing the Al Sa'ud monarchy of Saudi Arabia throwing an international hissy fit. This story began last week when the Saudi government announced that it was rejecting the seat on the United Nations Security Council. In rejecting the seat—which it was awarded after concerted lobbying by the Saudi’s themselves—the Kingdom of Saudi Arabia lambasted the United Nations, and the Security Council in particular, for its failure to act against the Syrian regime of Bashir al Assad, as well as its failure to address the Israeli-Palestinian issue.

The rejection of the United Nations for failing to match the Kingdom’s longstanding "support of moderation and in support of resolving disputes by peaceful means" and intimations of dissatisfaction with the non-democratic structure of the Security Council was imperious and utterly without irony. The Saudis, after all, are one of the most repressive and feudal ruling elites in the world, who have a long history of covert funding of extremist Islamist terrorist groups across the globe. The rejection that began as a slap at the United Nations evolved in the ensuing days into a barely concealed assault on the foreign policy of the Obama administration. Not since 9/11 have Saudis grabbed the world stage to vent their anger at America with the full throated passion we have seen this week.

Prince Bandar bin Sultan—for many years a running buddy of the Bushes and the newly crowned head of Saudi intelligence—has seen the full betrayal of everything that matters to the Saudis, as the current American administration has repeatedly acted against Saudi wishes. The Saudis have watched as the Obama administration betrayed long-time American ally Hosni Mubarak in Egypt, and then turned its back on General Sisi after his coup against the Muslim Brotherhood. They have watched as Barack Obama vacillated  in his support of Sunni fighters in Syria and then walked away from a military attack on the Assad regime. They are now watching as Barack Obama pursues the possibilities for rapprochement with Iran, in the wake of the election of Hassan Rouhani, an action that would mark a complete and utter betrayal of everything for which the half-century old Saudi-American alliance has stood.

Of course, there never was an alliance between the United States and Saudi Arabia, at least not in the deeper sense of a coalition grounded in the pursuit of common interests. Ours has been a transactional political relationship that produced something that each side needed. We needed a stable and predictable supply of oil and a recycling of petrodollars. They needed the protection of U.S. military power to secure the interests of the Al Sa'ud regime against all enemies, foreign and domestic.

That was the relationship. Other issues—such as U.S. support of Israel and Saudi support of ultra-orthodox Islam—became points of tension along the way, but were never allowed to undermine the central rationale for the relationship.

Since the first oil embargo in 1973, the essential Saudi-American relationship has been predicated on 'you get our oil, we get your military,' as Jimmy Carter created the Rapid Deployment Force—the precursor to CENTCOM—to secure the Saudi oil fields and the Kingdom. Since that time, it has become standard fare to watch American presidents paying obeisance to one Saudi king or another.

It is oil—a geological coincidence—that had bought them everything. But somehow, Prince Bandar seems to have spent too many evenings watching Lawrence of Arabia, which celebrates the emergence of the Saudi nation, and not enough watching Syriana, which portends a post-apocolyptic vision, a world of declining oil reserves where growing rising popular anger turns Islamist terrorism against the Saudi homeland. The past weeks have been a rude introduction to a future of declining influence, where it is a race against time before the Al Sa'ud family century runs its course.

The endgame on Syria took the worst possible turn for the Saudis. The New York Times headline said it all. U.S. and Russia Reach Deal to Destroy Syria’s Chemical Arms. Syria was not at the table, to say nothing of the Saudis. Instead, the old Cold War adversaries sat down and worked things out. It was like the clock had been turned back a hundred years, to the early 20th century, with US Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov playing the roles of the British and French diplomats Sykes and George-Picot, who in 1916 secretly mapped out what would become the boundaries of the modern Middle East after the fall of the Ottoman Empire.

Oddly enough, when Vladimir Putin seized the moment to rebuild Russia's relevance in the world as he helped Barack Obama extract himself from a foreign policy mess of his own making, few back in the Washington, DC really had much to say about it. Unlike every other issue, where the pundits and politicians quickly go to the mattresses, criticism of the President was largely muted, even if it mean ceding some respectability to the ceaselessly self-promoting Russian. The relative quiet surrounding the Syria denouement did not reflect a return to the internationalist notion of decades past that partisan politics "ends at the water's edge," but rather sheer exhaustion and lack of any better ideas.

But it was Putin who really put Bandar in his place. Bandar had been lobbying the Russians for months to cut Assad loose. Last month, Bandar made his final play  as he brandished both the carrot and the stick to induce Putin to turn on Russia's long-time ally. First, as reported in Al-Safir, Bandar offered an alliance between the Saudis and the Russians (not members of OPEC) with the prospect of controlling the world oil markets. Then he offered a barely veiled threat to the security of Russia's 2014 Sochi Olympics. Give me Assad's head on a platter, Bandar proposed, and “I can give you a guarantee to protect the Winter Olympics next year. The Chechen groups that threaten the security of the games are controlled by us.”

For Bandar to sit across from Putin—whom he should have revered as a spymaster of the old school—and believe he could intimidate him was a dramatic misreading of Saudi power. Putin rejected Bandar's entreaties out of hand, and as to the Saudi's threats, Putin—whose career has been defined as much as anything by Russia's Chechen wars—responded, “We know that you have supported the Chechen terrorist groups for a decade. And that support, which you have frankly talked about just now, is completely incompatible with the common objectives of fighting global terrorism."

With a population that is one-sixth Muslim, and a country whose southern borders abut Muslim nations, the Russians are acutely aware of the threat posed to their nation from Muslim extremism. Mistaking a transactional relationship for an alliance, Bandar demonstrated that the Saudis have no common interests with the Russians, but instead confessed to what all presumed to be the case: As the paymasters of Islamic terror networks, the Saudis are the source of the very problems that are of the greatest concern to the Russian national security establishment. Putin's response mirrored the Bush Doctrine of a decade ago: "Any nation that supports terrorism we regard to be as a hostile regime." 

Then, as if the world were piling on just when the Saudis were down, came this week's headline, "U.S. surges past Saudis to become world's top oil supplier." The PIRA Energy Group report pointed to the resulting security of global oil supplies for years to come, a factor that can only undermine Saudi power and leverage.

Even if the Arab Spring has not yet arrived in the Gulf, it is becoming apparent that the Saudi's world is changing. The Saudis and the Gulf monarchies are under increasing pressure, both from increasingly restive populations as well as the consequences of over-leveraging that has left many of those states unable to support their current spending levels at the current market price of oil.

This week, the Al Sa'ud monarchy has seen its world begin to unravel. World leaders are no longer bending to their will. They have seen their long-held grip over American foreign policy in the region weaken. They made their play against the Russians, and Putin did not blink. The Saudis—who are used to dealing from a position of strength and leverage—are now being confronted with their own weakness. And weakness is the trait that the Al Sa'ud despise most of all.   

Sunday, October 20, 2013

The long war.

A week after Government reopened, the focus of attention has turned to the war for control over the direction of the Republican Party. Earlier this year, Sarah Palin voiced her grievances with the subordination of true Republican principles by establishment Republicans, and, flashing her inimitable disdain toward the GOP establishment, she suggested it might be time for the Tea Party to split off from the GOP.

For as long as I can remember, the Republican Party has been riven between conservatives and moderates. Growing up in New England, the iconic profile of political courage was not that of the young JFK serving as commander of PT-109, but rather Joseph Nye Welsh standing up to Joe McCarthy during the Army-McCarthy hearings in 1954.

Welsh, a partner at a white shoe Boston law firm, was serving as counsel to the Army when he berated McCarthy for persisting in attacking an associate at his firm. His words--"You've done enough. Have you no sense of decency, sir?"--publicly embarrassed McCarthy, and marked the end of his crusade to expose Communist sympathizers within the State Department and the Army itself. It was not a Democrat who took on McCarthy, but rather a high brow Boston Republican. It was not a cabal of Democrats in the Senate that led the ensuing campaign to censure McCarthy, but rather a small group of Republican Senators, led by Maine's Margaret Chase Smith and Vermont's Ralph Flanders, that brought him down.

Today's simmering civil war within the Republican Party reflects sectarian animosities with deep roots. The image of Joe McCarthy, a Catholic farm boy from the upper mid-west, being humiliated by the Episcopalian, Phi Beta Kappa, Harvard lawyer is an enduring one that reflects the historic animosities between Main Street and Wall Street Republicanism. For many on the right in the GOP today, Welsh is no hero. It is McCarthy who is owed an apology, whose reputation in history has been been treated indecently. Evidence uncovered in the Kremlin archives, they argue, has proven the bulk of McCarthy's claims to be accurate. The State Department was in fact riddled with Soviet agents of influence. At best, in their view, McCarthy's tactics were ill-conceived. At worst, he was an American hero pilloried by the liberal left, but ultimately betrayed by moderates in his own party.

The demise of McCarthy at the hands of Republican moderates was just one moment in a recurring history of internecine warfare. Ten years after McCarthy's humiliation, the conservative wing of the party would find vindication with the victory of Arizona Senator Barry Goldwater over New York Governor Nelson Rockefeller. Notably, it was in response to Rockefeller's speech at the Republican National Convention accusing Goldwater of being an extremist--rather than against some Democrat attacks--that Goldwater uttered his famous words, "I would remind you that extremism in the defense of liberty is no vice. And let me remind you also that moderation in the pursuit of justice is no virtue."

Goldwater's words would become the defining defense of conservative Republicanism, just as the ensuing decades of success by conservatives in dominating the Republican Party politics and moving the GOP to the right ultimately began with the Goldwater campaign.

Growing up in famously Democratic Massachusetts, voters as often as not turned to Republicans for steady, mature leadership. John Volpe, Frank Sargent and Bill Weld--and later Mitt Romney--were moderate Republicans who became successful Governors of that deep blue state. Liberal Democratic Massachusetts--the world of academia and the professional classes--was a side show in Boston. Once you got past the liberal bastions of Cambridge, Newton and Brookline, the Democratic Party in Massachusetts was the captive domain of Billy Bulger--the powerful brother of recently convicted mobster Whitey Bulger--who as State Senate President dominated Massachusetts' well-honed patronage machine. It was the party of Billy Bulger and Joe Kennedy, the party of ethnic passions and Kennedy money. It was against that background that the Republican Party was rewarded for being the party of prudence and reason, and entrusted with the responsibilities of governing. "If you were not a Democrat in your 20's, you had no heart. If you were not a Republican in your 40's, you had no brain," the saying went. Republicans were supposed to be the grown-ups.

Sarah Palin--and her Tea Party compatriots--inherited a different Republican Party, one that was profoundly changed by Nixon's Southern Strategy that leveraged the passions of the Goldwater faction with the new realities on the ground that grew out of the Voting Rights Act of 1965. The modern GOP has been more overtly divided between the northeastern elites that date back to the founding of the GOP, and its increasingly southern and western base. No events up until the formation of the Tea Party highlighted the regional and class resentments within the GOP more than Patrick Buchanan's presidential campaigns of "peasants with pitchforks" challenging the incumbent George H.W. Bush in 1992 and Bob Dole four years later. As Buchanan said at the time, "If the country wants to go in a liberal direction... it doesn't bother me as long as I've made the best case I can. What I can't stand are the back-room deals. They're all in on it, the insider game, the establishment game--this is what we're running against."

Only time will tell if the events of the past week rise to the historic significance of the McCarthy-Welsh standoff or the 1964 convention. But the capitulation of Ted Cruz and House Republicans in the recent debt ceiling battle is already being viewed in the eyes of Cruz and his supporters less as a defeat at the hands of President Obama and Senate Democrats than a product of abject betrayal from within the Republican ranks.

And this is an honest portrayal. Ted Cruz and his followers in the House indeed had victory within their grasp--many of them salivated at the prospect of going over the cliff--before they prostrated themselves before Mitch McConnell and other Senate Republicans, who, in the name of bipartisanship, yielded to the unholy alliance of Wall Street elites and Republican elders. The humiliation was complete, as summed up in the New York Times headlineAt 11th Hour, G.O.P. Blinks in Standoff.

The battle within Republican ranks will only intensify in the weeks and months ahead. While the conventional wisdom is that Ted Cruz is leading the GOP down a path toward electoral suicide, conservative loyalists within the party reject that formulation. They argue instead that theirs is the only strategy that offers the GOP a path to success. Bipartisanship--the mantra of party leaders who have been vocal in berating Cruz and his followers--is itself what must be resisted. Bipartisanship--as FreedomWorks co-founder and former Republican Majority Leader Dick Armey famously said--is another name for date rape.

Conservative Republicans--harkening back to the Goldwater campaign--make the simple argument that the most committed wins. Goldwater might have lost--and lost badly--but that loss laid the groundwork for the decades of success that followed. Grover Norquist, founder of Americans for Tax Reform, solidified the modern Republican Party electoral strategy around a coalition of single issue, litmus test voting groups--non-negotiable pro-gun, anti-tax, pro-life, home-schoolers, property tax rights and other principles--that produced conservative success for decades.

For moderate Republicans, the absolutism inherent in Norquist's formulation is anathema to the notion of politics as the art of the possible, the politics that have enabled Republicans to win and govern successfully in blue states from Massachusetts to California. But conservatives push back and argue instead that GOP success at the national level over the four decades since Lyndon Johnson's second term in office was built around the strength of those convictions. Other than the loss to Jimmy Carter in the wake of the Watergate scandal, they argue, the Republican Party did not lose a straight up election to the Democrats for forty years from 1968 to 2008. Conservatives attribute Bill Clinton's victory in 1992 to Ross Perot taking 19% of the vote--largely from the Republican column--as Clinton beat Bush 43-38%.

While Republican strategists looking at demographic changes argue that it is imperative to broaden the GOP coalition from its aging, white base, conservatives are loath to abandon the absolutism of the Norquist strategy that has served the GOP well. People of faith within the GOP coalition point to New Jersey Governor Chris Christie's overwhelming popularity as a pro-life Republican governor of a traditionally blue state as evidence that there is no need to give ground on their core values. Similarly, second amendment voters point to the rapid fading of the gun issue nationally, even in the wake of repeated tragic events. They argue not only that ceding the gun issue is not critical to electoral success at that national level, but that to do so would cost the GOP the proven passions of the pro-gun voters.

Establishment Republicans and traditional large contributors who are urging the GOP to turn back from the trail that Ted Cruz is blazing, will be hard pressed to counter the passion and energy that the debt ceiling battle has unleashed. The argument that moderation is important to winning back public support that has turned against the GOP will once again be countered by those on the right who will argue that on election day, it is passion and core principles that brings out voters. The animosities voiced by Ted Cruz and his followers toward establishment Republicans mirror similar grievances dating back decades. They believe that they have been wronged by the establishment urge to bipartisanship and they will be loath to let it happen again.

Faced with the logic of the world according to Ted Cruz, a friend who is a national GOP strategist suggested that it was the Democrats who would ultimately benefit in elections to come from the rise of Ted Cruz. "My humble opinion is that they over estimate the Tea Party / social conservative base. Watch the Texas Governor's race. The Dem's will win... So called moderates will vote the Dem's in... Cruz strategy hurts Republicans in the long term. Hope you are well."

Tuesday, October 15, 2013

Uneasy lies the head.

At the end of 2012, after he had been safely ensconced in the White House for another four years, President Obama had a chance to put all of the budget wrangling to bed, for good. The Bush-era tax cuts--passed as the Republican solution to the accumulating surpluses beginning in the last years of the Clinton presidency--were set to expire at the end of 2012, and the President had a choice to make. He could make a budget deal with Congress to extend some or all of the tax cuts, or he could do nothing.

For a decade, it had been a Democrat mantra that the Bush tax cuts were the cause of our fiscal imbalances, and that they should be repealed at best, or allowed to expire, at worst. As President, Barack Obama had repeatedly talked about the need for more revenue. But, at the end of the day, even with his reelection behind him, he was not prepared to seize the moment. He was not prepared to allow tax rates to go up on the middle class, even if only to the levels in place at the end of the Clinton presidency. Thus, the moment was lost and the surge in federal debt continued.

Today, such a moment has been reached for Senator Ted Cruz. Newly arrived in the Senate, Cruz emerged as the majordomo of the House Tea Party Republicans who have chosen to use their leverage over the funding of the government and raising of the debt ceiling to win concessions on spending and the implementation of the Affordable Care Act. Like President Obama, Ted Cruz has the opportunity of a lifetime to change the course of American history, simply by convincing his minions in the House of Representatives to do nothing. Just as by doing nothing late last year, President Obama had the opportunity to resolve decades of partisan wrangling over deficits, so too Ted Cruz can achieve the equivalent of the Tea Party holy grail of a balanced budget amendment to the Constitution if he has the nerve to stand his ground.

In the last iteration of the debt ceiling negotiations, in 2011, the resolution included the requirement that there be a Congressional vote on a balanced budget to the Constitution. Of course, such a vote required a two-thirds majority prior to even being considered by the states, and, as such, was a non-starter. But a balanced budget amendment remains the sine qua non of the libertarian and Tea Party world views, and now Ted Cruz has it within his grasp.

Ted Cruz may have felt heat before, somewhere in his life, but it is nothing like the pressure he will come under in the next 48 hours. For almost a week now, John Boehner and the House suicide caucus have faded from the front pages, and Cruz himself has been the target of unrelenting ire within the Republican establishment. DC elders, having failed to make progress in the House, turned to their attention to putting together a deal in the Senate, in the hope that at the last minute, faced with the fate of the world hanging in the balance, Ted Cruz and the radicals in the House would fold.

Karl Marx famously observed that historical personages and events appear twice, the first time as tragedy and the second time as farce. And thus it appears to be with these debt ceiling events, as this one has devolved into one more media extravaganza. Two years ago, world markets took the notion of an American default quite seriously. The Dow dropped over 16% as that prolonged negotiation dragged on, and bond market volatility was pronounced. Not so this time. With 48 hours to go before the apocalypse descends upon us--with dire predictions of rising Treasury bond yields and plummeting stocks--markets remain largely unaffected. The Dow is down less than 1% over the past month, and benchmark Treasury bond yields are lower now than one month ago. Investors, it seems, no longer take Washington predictions of doom too seriously.

There are two pivotal insights here. First, the bond markets appear to have internalized the simple truth that there will be no payment default on any U.S. Treasury obligations, come what may. When any Treasury securities come due--obligations that bear the full faith and credit of the United States of America--and are presented to the Federal Reserve Bank for payment--the same Federal Reserve that creates $85 billion each month out of whole cloth in its quantitative easing program--they will be paid. There are no effective constraints to such payments by the Fed, and to not pay maturing Treasury securities when due would violate the 14th Amendment to the Constitution.  

Second, from a bond market perspective--and given the fallacy of the potential for a payment default--all of the institutional pressures from the fiscal negotiations point to downward pressures on deficits, one way or the other. Therefore, the future looms to be one of reduced borrowing, reduced debt, and, the ravings of the anti-fed faction in the Cruz caucus notwithstanding, low inflation. All of those factors translate into lower bond interest rates, not higher ones. For now, with the global depression continuing to haunt Europe and Japan, or the Chinese yuan as little more than a proto-currency, investors have nowhere to go but the dollar.

Goldman Sachs has estimated that a failure to raise the debt ceiling would cause a 4.2% pullback in economic activity, thus the real consequence of a failure to raise the debt ceiling will be to throw the U.S. economy into recession. Goldman's report suggests that this, rather than any cash default, would be the material consequence of non-action by Congress.

This is the endgame that Ted Cruz is playing with. It is the path of least resistance to achieve the effective equivalent of a balanced budget amendment. But unlike the passage of a balanced budget amendment, there would be no phase in or time to prepare. Instead, if funding is curtailed effective this Friday morning, the impact will be harsh and it will be immediate.

The media consensus is that the Republican Party is the loser as a result of the ill-conceived strategy thrust upon them by Ted Cruz, and that Republicans must ultimately come crawling back to the President and the Democrats, take their medicine, and forsake their goals. But Ted Cruz does not have to play it that way. His is a high stakes game for the nation, as well as for Cruz himself. If he folds his cards now, just as victory lies within his grasp, the Tea Party movement will have been stripped bare and left with nothing but the continuing antics and buffoonery of their clown princess Sarah Palin, with Cruz relegated to the shadows. Instead of the resentments of his peers in the Senate, it will be the Tea Party base that will turn on Cruz for his weakness, and thus dash his own political ambitions.

But if Cruz confounds the odds and plays his ace card, he will cast the nation into an uncharted economic abyss. There is a reason that balanced budgets have not been achieved through the normal appropriation process: everyone, on both sides of the aisle, likes to spend money and bring home the bacon for their constituents. Members of Congress may like the Ryan budget in theory--for all his rhetoric, Ryan never specifies what he would cut to bring spending down to 19-20% of GDP--but in practice no one wants to cut anything that benefits their constituents or their contributors.

That is the outcome that could transform the nation, and its budget debates, as Cruz's most loyal Tea Party acolytes would learn the hard way that their Medicare and veterans benefits, and the other programs upon which they rely, are all the stuff of government. With tax receipts only covering 81% of mandatory and discretionary spending, everything would be cut back significantly. Ted Cruz will have delivered the holy grail to his followers, but in the face of the turmoil that ensues, he may find little he garners little gratitude or praise in its wake.

Saturday, October 12, 2013

Peas in a pod.

They despise each other, call each other terrorists and gangsters. They cannot imagine ways in which they are similar. They occupy opposite ends of the political spectrum. They each believe that they stand for essential higher values that much of the public chooses to ignore at their peril. They believe their actions, as much as they might engender public resentments, are in service of long-term goals critical to the well-being of their supporters and, ultimately, the public at large.

And in service of those values, they are willing to exercise the greatest leverage they have, at the point in time when the impact of that leverage is greatest, to accomplish goals that have proven to be out of their reach through the normal workings of government.

In a nutshell, they disdain the regular order of things and the workings of government when it does not produce the outcomes that they desire. And to them, those outcomes warrant wreaking havoc on the larger economy if need be.

The Tea Party caucus in Washington, meet the Service Employees International and the Amalgamated Transit Unions that represent the BART transit system employees in San Francisco. While the Tea Party caucus continues to keep the federal government shut down and world markets in an increasing state of anxiety, the BART unions have proven that they are willing to shut down the San Francisco area economy if their demands are not met, regardless of the harm inflected on hundreds of thousands of people across the region. In what has traditionally been a union town, more than three quarters of the public are opposed to the proposed labor action by BART workers in a recent poll, most of them strongly opposed.

The Tea Party, of course, has been front and center in the movement to undermine the power of public sector unions exactly because of the leverage unions have been able to exert--through the ability to strike and elect political supporters to public office--to achieve their goals. And to be sure, the ability of public sector unions to strike has been one of four significant sources of fiscal instability undermining the finances of local governments across the country. The other three: public financing of political campaigns that contributes to corruption deeply embedded in our democracy, financial derivatives that place great risk on public sector balance sheets, and the mobility of capital that has drained urban economies of their middle class job base.

The problem of public pensions is directly related to these four factors. Public pensions themselves are not the problem, but rather an evolving underlying economy that has undermined the assumptions upon which those pensions were based. A bit over a decade ago, public sector pensions were largely fully funded, and the projected investment return assumptions appeared reasonable. The structure of those pensions did not change. What changed was the validity of the underlying economic assumptions, and the impact on local economies of the combined forces of globalization and technology.

Ultimately, the challenge to BART workers is that the median middle class incomes of taxpayers and transit riders who ultimately fund their wages and benefits have stagnated over the past decade. As such, BART workers are not simply asking for a fair share for themselves, but to improve their economic position relative to the commuting public that they serve. As such, fact finding and arbitration--the traditional means of resolving labor disputes--would be unlikely to achieve union demands. Arguments about the 1% and income inequality have little salience in a situation where the funding is derived from the BART riding public and local sales taxes. Larry Ellison does not ride BART, and even Google employees have their own bus system.

Like the Tea Party, BART workers have the strong support of barely one-quarter of the population. Yet, there is little doubt that those that support the goals and tactics of the BART unions particularly revile the Tea Party, and would be loath to acknowledge those things that they have in common. Both the Tea Party and Bart unions are attempting to use the threat of massive economic dislocations to achieve outcomes that they have otherwise been unable to achieve. And both find themselves confronting a public that finds economic blackmail to be an unacceptable strategy for the pursuit of parochial political and economic interests, and as such risk long-term public opprobrium that may undermine any near term gains they believe they can achieve.

Thursday, October 10, 2013

The Taker Caucus

As a child of a family therapist, I have been trained from my formative years to look at events through the lens of family history. My grandparents included a Goldwater Republican from Chicago, a Nixon Republican from Montgomery, Alabama, and two Humphrey Democrats from Kiev. Thus, I am the picture of a modern Californian: part fiscal conservative, part social liberal, half immigrant. One documented, one not.

As a Californian, I am proud of my state's embrace of immigrants. They come from other states and other countries to imagine new technologies and build a future that exists only in their imagination. And they come from other countries with a willingness to work hard and a determined faith that their family's future will only be constrained by their own energy and imagination.

From a Tea Party perspective, no doubt, the world that I embrace is emblematic of all they disdain. Social insurance reforms were implemented here years ago. Immigration reform pushes the boundaries of what is permissible within a federal context. The simple fact is that the work and energy here is driven by the young and the newly arrived. Industries from tech to Hollywood to aerospace are enabled by the qualities and motivations of the labor force, educational institutions and financial infrastructure. In this context, enforcing health insecurity as the grounding of personal freedom seems at best quaint, at worst cruel.

The Tea Party has all the elements of revanchist denial of the world as it is. Rick Santelli's original rant on the floor of the Chicago Mercantile Exchange that is credited with being the founding moment of the movement was itself steeped in the ironies and rhetorical manipulations that have defined the Tea Party. After all, Santelli stood before an audience of commodity traders on a cable network that caters to the financial markets and decried the behavior of "losers" who took on the no down payment mortgages and liar loans on offer from Wall Street. Santelli's rant justified the now deeply rooted denial across the entire industry of bankers and traders that they in any way contributed to the $24 trillion of losses across the national economy that the Dallas Fed has traced to the 2008 financial crisis. In the half decade since Santelli laid down the emotional foundation for the Tea Party, those traders and others have been made fully whole by TARP and other legislation, and Fed policies have restored upwards of $4 trillion to the balance sheets of the rescued Wall Street banks--funds that were effectively stolen from the accounts of retirees, pension funds and other savers across the economy. Yet, to this day, there has not been even a whisper of gratitude from Wall Street to the nation that paid the price for the arrogance and excesses of the financial sector.

The famous plea at an early Sarah Palin rally to "not let the Government get its hands on our Medicare" became the second foundational rhetorical manipulation of the Tea Party movement. Like Santelli's rant, this plea to protect the common folk from the predations of government harkened back to the anti-government language that served Ronald Reagan to such great effect. But if one can debate the complex roots of the financial collapse, the fact of Medicare as a government program is unarguable.

Suzanne Mettler, of Cornell University, has documented the extent of public attitudes denying their own use of government programs. Her data suggesting that 40% of Medicare users deny that they have used a social program is fundamental to the challenges underlying the divide in Washington today. If Reagan helped through his rhetoric to harden anti-government attitudes across a broad section of the American public, the process of cognitive dissonance--or simple denial--has now resulted in people who instinctively hate government apparently concluding that anything on which they depend must not be government. Thus, a large share of Medicare beneficiaries deny that they benefit from any government program, just as our leading bankers continue to deny that they are beneficiaries of public largesse.

As a Californian, I hear the continued slights of the Golden State's slide into fiscal irrectitude. Even as Jerry Brown has demonstrated what a principled elder statesman can accomplish, he is criticized for relying on a mix of tax increases and spending cuts to tackle the State's serious fiscal challenges. But the slings and arrows from the conservative right are a bit hard to take. In particular, it is hard to abide the pious words of supply side guru Art Laffer and former Club for Growth President Stephen Moore who, in a recent Wall Street Journal op-ed, extolled the policy paths of those states--largely those of the old Confederacy--who, in contrast to California, are eliminating their income taxes and pursuing supply side policies.

How easy it is to be one of those states that Laffer and Moore praise. How easy is the rhetoric of the Tea Party members of Congress who have brought the nation's business to a halt with their demands to end the binging on public money, the profligacy that is undermining our moral character and financial stability. With a rhetorical slight of hand that harkens back to Ronald Reagan's folksy indictments of welfare queens and food stamps, one Tea Party member of Congress after another repeats the calumnies against all those who would deny them the power they crave but have been unable to achieve through the regular order of things.

It is the rhetoric manipulations that are so galling. The arrogant claims to fiscal rectitude of the Tea Party bely the underlying realities. They are not the makers of their own imagination, but are rather in large numbers the takers that they have been so quick to disdain. Their members are older and more dependent on Medicare than the rest of the population. They might prefer to imagine that Medicare is not a government program, but it is, and this year its share of the federal budget will surpass Defense to become the largest area of expenditure after Social Security. They might imagine that what they are taking out of it is only what they put in over their in the workforce, but that is a far cry from the truth. The average Medicare recipient now takes out ten times what they paid in.

Medicare is a general welfare program. Say it slowly. And repeat.

But it is more than that. Too many of those Tea Party pols that quote shibboleths from the founders to somehow justify their own anti-democratic conduct, and who decry debt and profligacy, come from states that take more from the public trough than they put in. This is the essential problem with the Laffer/Moore hypothesis: The states do not stand alone. There are, in the Tea Party terms, makers and there are takers, and the flow of federal dollars dwarf the local dollars.

Here are some data points: Consider a cohort of Red states whose Tea Party members have been so quick to disdain the rest of us. Mississippi, Alabama, Louisiana, South Carolina, Virginia, Tennessee and Kentucky. Each of those states voted Republican in each of the past three presidential cycles, except for Virginia. And take a cohort of Blue states who in Tea Party eyes are the epitome of Liberal corruption, of all that troubles our nation--California, Massachusetts, New York, Connecticut and New Jersey--each of which voted Democrat over those same years, to confirm their lascivious nature.

Citizens in those Red states earn on average $24,000 per year, and taxes paid from those states to the federal government total just over $6,000 per capita. In contrast, citizens in the Blue states earn an average of $33,000, and the taxes paid per capita are a bit over $12,000. The Blue states are wealthier, and they provide more revenues to the Federal Government. No surprise there.

But due to our Constitutional framework, smaller states are better represented in Congress. 1.2 times better in this case. The Red states cohort here has one member of Congress per 556,000 people, while the Blue states have one per 651,000. The consequence of this over-representation often gets lost in the arrogance of the Red state hubris: They take back more than they give, and have succeeded in assuring that a disproportionate share of federal dollars flow back to their states to subsidize their economies and standards of living. While Red states pay in $6,000 per person, they get back $11,000 per person. In contrast, those Blue states pay in $12,000, but get back just two thirds of what they contribute, or just over $8,000.

There is nothing new in this. Literally dating back to Reconstruction, the federal dollars has invested disproportionate sums to build up the economy of the south. Military bases, waterways, electrification, hospitals, the list goes on. The bottom line is that today this cohort of Red states gets back over $4,000 per person more that they pay inalmost exactly the reverse of this group of Blue states, which contribute $4,000 more per capital than they get back. Those Red state residents are not just getting all of their federal dollars back, but a bonus equal to 20% of their per capita income. Courtesy of the Blue states. Courtesy of the Constitutionally defined power structure. And courtesy of the regular order of budget decision-making over the years that has, and continues, to pour money into smaller and rural communities.

This data set is not an aberration. Of the 20 states that take substantially more than they contribute, 14 voted Republican Bush/McCain/Romney. In contrast, of the 16 states that contribute materially more than they get back, only three--Texas, Nebraska and Arkansas--are red states, while 10 are deep blue.

I happen to believe that we do have a debt problem to attend to, and that entitlement spending is slowly usurping the capacity of the federal government to invest in needed areas. But it gets old listening to the same old rhetoric--from bankers whose industry has sapped the nation and retirees who prefer not to believe that they are beholden to the rest of us--about how everyone else is the problem.

From a Californian perspective, these numbers are stark. After all, that money that we send back--that primarily ends up subsidizing the economies of Red states--comes at a price: It increases the amount we must tax ourselves. You have to admire the brilliance of those anti-tax, small state Republicans. In a quite literal sense, when Californians approved an increase in income tax rates this past election day, we were agreeing to tax ourselves so that we could continue to send money to those states of the old Confederacy. This continuing flow of outside tax dollars from other states then allows politicians in those states to cut their tax rates on their own citizens and trumpet their anti-tax bona fides.

And this is celebrated on the pages of the Wall Street Journal as inspired public policy.

If the Tea Party Republicans want to radically reduce spending, how about a simple new rule that says that no state will receive back more money from the federal government than it pays in. That way, the excess tax receipts coming from those Blue states can be used to pay down the deficit, and those Red states can learn to walk the walk for a while and get along on their own without our money. A little fiscal rectitude is good for the soul. Jerry Brown tells us so frequently.

But if the Tea Party shuns this suggestion, I would suggest we give the Suicide Caucus a more apt name. The Taker Caucus. They are taking money from the rest of us, and rather than showing the least bit of humility or gratitude, they have make clear their intention to destroy the regular order of the democracy of which they are supposed to be a part, and from which they have taken so much, for so many years.

The discourtesy and ingratitude of too many of the Tea Party caucus is shameful. At our family gatherings, my Republican grandparents could not have had less in common with the Russian immigrants who sat across the table. As hard as they might try, they could never really understood each other. Their worlds were just too far apart. But they knew that their lives and futures would be forever intertwined, and based on that alone they built a foundation of respect and mutual appreciation. And that is how it should be in our politics. Our collective future depends on it.