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.

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.

Known unknowns.

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

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

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

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

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

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

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

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

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

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

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

The road to Damascus.

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

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

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

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

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

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

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

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

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

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

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

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 majority, Reagan 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.

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.

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 Folly, Harvard 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

David Stockman redux.

He chose him for his conservative zeal and youthful energy. His reputation as a fiscal whiz. He has intensely opposed Government intervention in the economy--whether by regulation or subsidy. He will be no mere budget trimmer, but rather a pivotal figure in the effort to restrain the Federal budget, upon which all else depends.

It was in these words that New York Times described not the political ascendency of Paul Ryan, but rather of his political doppelganger, David Stockman, thirty years ago.

David Stockman was the Paul Ryan of the Reagan era, and the similarities are uncanny. A rising conservative star whose southwestern Michigan district was just across the lake from Ryan's, David Stockman was a 34-year-old Congressman who was famous for his mastery of the arcane details of the Federal budget. When Ronald Reagan selected him to be the Director of the Office of Management and Budget, it was a pivotal appointment, as the central question facing the Reagan Revolution--from old line Republicans as well as Democrats--was whether Reagan could cut taxes, increase defense spending and balance the budget, all at once.

Stockman believed that it could be done, or as he said at the time, "The whole thing is premised on faith. On a belief in how the world works."

And the rest is history. The Reagan administration transformed Washington.

Stockman did not succeed in balancing the budget. But unlike revisionist defenders of the Reagan era, he did not blame it on the duplicity of Tip O'Neill and the Democrats, but rather on the perfidy of fellow Republicans. What was birthed in that era was--in the words of fellow Republican apostate Pete Peterson--the unholy alliance of tax cutting Republicans and big spending Republicans. Together, they untethered the Grand Old Party from its roots as the party of frugality and prudence, and embraced the singular legacy of the Reagan era--the realization that balanced budgets were no longer either a political or economic imperative.

And this perfidy lies at the core of Paul Ryan's much vaunted Roadmap for America's Future. For all the claims to being a document of budget wizardry, the Roadmap offers little policy insight beyond its fundamental, and unarguable, stipulation: We cannot continue to borrow forever. Beyond that, the Roadmap offers little more than an assertion of the author's own political imperative--in this case capping spending at 19% of GDP--and assuming that Congress in future years will agree to curb spending in excess of that cap.

I published the graph below several months ago in a post about the Obama-Boehner negotiations. The graph incidentally makes the same simple point as the Roadmap: "If Federal spending were to be capped at its pre-financial crisis average since the mid-1970s of 20.8% of GDP, five categories of spending--Social Security, Medicare, Medicaid, Defense and Net Interest--will steadily squeeze out all other areas of entitlement and discretionary spending. By 2022, Everything Else is reduced 57% from its historical average of 6.4% of GDP to 2.7% of GDP."

This is not a great insight. It is simply a product of understanding budget numbers at the most rudimentary level and having some facility with Excel. And yet this is the basic insight of Paul Ryan's plan. Ryan does not say what he proposes to cut--beyond proposed cost shifting of healthcare costs to beneficiaries--indeed he barely discusses non-entitlement, non-defense spending. Instead, he simply asserts that if there were a hard spending cap, that would force drastic--but undefined--reductions to stay within aggregate spending limits.

But to say what is squeezed out is not a question of budgetary wisdom, but pure politics. Why does Ryan's plan preserve Medicare untouched for those 55 years and older? The answer is not because they paid for it and therefore are entitled to it--because they didn't pay for it. Medicare is in large measure paid for by general tax revenues just like everything else. It is simply because they vote, and they vote with a greater sense of determination and focus than those who are 35 years old and younger.

Imagine what a roadmap might look like if those aged 18 to 35 had the political clout that their numbers might demand? One could imagine that Pell Grants would be the third rail of politics. Military action as a tool of foreign policy might be viewed with greater skepticism if political power hinged on the votes of those whose lives were to be put in harms way. And Social Security and Medicare would more likely be means tested and subject to spending limits. Perhaps if the young electorate whose wallets were to be raided to pay for it all down the road voted their self-interest with the same ferocity of older voters, we might have less willingness to borrow today to pay for a broad-based welfare state for the elderly. It is all about who shows up on election day.

While conservatives heap adulation upon the Ryan as a thinker, David Stockman is not fooled. He understands that Ryan's document demonstrates neither budgetary insight nor political courage. Writing on the op-ed page of the New York Times last week, Stockman assaulted Ryan's plan:

Thirty years of Republican apostasy--a once grand party's embrace of the welfare state, the warfare state and the Wall Street-coddling bailout state--have crippled the engines of capitalism and buried us in debt. Mr. Ryan's sonorous campaign rhetoric about shrinking Big Government and giving tax cuts to 'job creators' (read: the top 2 percent) will do nothing to reverse the nation's economic decline and arrest its fiscal collapse...

But the greater hypocrisy is his phony "plan" to solve the entitlements mess by deferring changes to social insurance by at least a decade.

A true agenda to reform the welfare state would require a sweeping, income-based eligibility test, which would reduce or eliminate social insurance benefits for millions of affluent retirees. Without it, there is no math that can avoid giant tax increases or vast new borrowing. Yet the supposedly courageous Ryan plan would not cut one dime over the next decade from the $1.3 trillion-per-year cost of Social Security and Medicare.

The sophistry of the plan rests in the simplistic assumptions it makes about the ability of Congress to designate cuts now for future years, as well as the assumption Republicans are not in fact big supporters of large swaths of the discretionary budget the Ryan presumes to simply assume that Congress will eliminate in future years. Indeed, Ryan's plan does not address how the fundamental question of how the budget would be balanced until the last few pages of his opus, this despite the presumptions that the existential threat to the nation is presumed to be the Roadmap's raison d'etre.

But that is the crux of the budgetary challenge, not a sideshow. What Ryan ultimately offers is nothing more than a repeat of the now decades-old idea of legislating hard spending caps. This is the same approach that failed with the brief experiment with the 1985 Gramm-Rudman-Hollings law. It failed in a different incarnation as Paygo rules. And it has failed again in the form of the 10-year scoring rules that are the reason the Bush tax cuts were supposed to have expired several years ago.

The problem, in its essence, is that Congress does not actually have power to impose cuts on the future, as any rule one Congress makes to control spending, the next Congress can undo. This is the essential dilemma that has underscored our budgetary politics since the political and economic imperative of balanced budgets was overturned in the wake of the Reagan revolution--only Congress can restrain itself, and if it doesn't want to, it won't.

What Stockman and Peterson understand is that for all of the hubris of conservatives in Congress, they are no different than their political brethren across the political spectrum. In fact, they have proved to be worse. They hold forth on the immorality of deficits and the path to ruin that lies ahead, but it is all just words--words that mask a deep hypocrisy and cynicism. And when David Stockman looks at the Ryan plan, and the fawning support of the conservative establishment in Washington, he cannot conceal his contempt.

It's rank demagoguery. We should call it for what it is. If these people were all put into a room on penalty of death to come up with how much they could cut, they couldn't come up with $50 billion, when the problem is $1.3 trillion. So, to stand before the public and rub raw this anti-tax sentiment, the Republican Party, as much as it pains me to say this, should be ashamed of themselves.

That about sums it up.

Born to Empire. All gone. All taken away.

In truth, it has been Albion’s summer to forget. Even as London basked in a successful Olympic Games, the City of London—their Wall Street—has suffered global attention of an altogether different sort.

Beginning in June, with the news that the British bank Barclays had agreed to pay a half-billion dollar fine for manipulating the LIBOR benchmark interest rate, the news has only gotten worse from one week to the next.

LIBOR—the London Interbank Offered Rate—actually refers to a number of interest rates along a yield curve calculated daily by the British Bankers Association (BBA). Each morning, a panel of up to 18 banks each submit interest rates at which they believe they could borrow a substantial amount of money from other banks for differing time periods—a thirty-day rate, a sixty-day rate, a one-year rate, and so forth. Much like a panel of Olympic gymnastics judges in years gone by, the BBA tosses out the highest and lowest rates, and takes an average of those in the middle that become that day’s LIBOR rates.

Barclays confessed to British bank regulators that over a period of years beginning in 2007, its traders had not submitted rates in good faith, but rather—like the East German judges of Olympics past—they had deliberately sought to skew the results, to manipulate LIBOR in directions that would benefit their trading positions. While at first it was unclear how much damage Barclays could have inflicted—after all Barclays was but one participant on the LIBOR panel—in the ensuing weeks other global bank members of the panel have come forward to admit that their traders conspired with Barclays to tilt the playing field in their favor.

To date, the list of banks who have stepped forward includes names that have become all too familiar for their participation in financial misdeeds over the course of the last half-decade: UBS, Deutsche Bank, Royal Bank of Scotland, Citigroup, JPMorgan, Credit Suisse and Bank of America. And the list goes on.

And then it got worse.

As July rolled into August, two of the most venerable British banks, Hong Kong Shanghai Bank (HSBC) and Standard Chartered, were accused by U.S. investigators and bank regulators of aiding and abetting global money laundering schemes. HSBC and Standard Chartered are particularly important institutions in British history. Each were created under charters granted by Queen Victoria, to create institutions to finance the growth and development of the Empire. HSBC was founded to fund growing British trade and investment in China, while Standard Chartered's mission focused on British colonies from East Asia to South Africa.

The first shoe to drop was HSBC, which was accused of complicity in $15 billion of money laundering and illicit transactions for Mexican drug cartels, as well as Russian and other international criminal groups. Then, before the HSBC story could fully sink in, Standard Chartered was accused by New York bank regulators of complicity in laundering a quarter of a trillion dollars of Iranian assets, and indirectly abetting terrorist activity.

For Americans, it is difficult to understand the depth of betrayal represented by the malfeasance at HSBC and Standard Chartered. America has always been suspicious of its banks, and our tradition is one of fear—if not conspiracy theories—of the power of our banks over our government, rather than the other way around.

In Britain, the anger at Barclays CEO Bob Diamond and before him Royal Bank of Scotland CEO Fred Goodwin reflected outrage at their failed stewardship of important national institution. Back here in the colonies, both the outrage and the treatment of Bank CEOs have been notably different. Regulators and the Justice Department have treated our top banks—now comprising JPMorgan, Citi, BofA, Wells Fargo, Morgan Stanley and Goldman—with kid gloves. Just this week, federal judge William Pauley grudgingly signed off on a $4.8 million fine for Morgan Stanley, for its part in an electricity price fixing scheme that cost New York consumers $300 million. Morgan Stanley earned on the deal was $21.6 million, and they admitted no wrongdoing in the plea agreement.

The Morgan Stanley settlement—representing less than 25% of their take—simply illustrated the profitability of behaving badly, and came the same week that the U.S. Justice Department decision not to prosecute Goldman Sachs for its conduct in shorting the housing market during the 2008 housing market collapse.

It should be conventional wisdom by now that regulators do not have the capacity to effectively counter the power of our dominant banks. This weeks news recalled the observation of one Wall Street trader that he and his brethren would not be deterred by fines—which are few and far between—only arrests would do the trick, as every trader’s greatest fear was that their mother would see them frog-marched off to jail on television.

In the post-2008 world, much discussion of banking in the U.S. has focused on the reintroduction of the Glass-Steagall restrictions that separated tradition commercial banking services—taking deposits and lending money—from investment banking and proprietary trading. Sandy Weill—the Godfather of the modern mega-banks who orchestrated the financial reforms that ended the Glass-Steagall restrictions—made waves in July when he recanted his views and called for the reimposition of Glass-Steagall.  Weill’s view reflects that of many on the right and the left who share the view of Paul Ryan, who stated succinctly at a town hall meeting in May, “If you’re a bank and you want to operate like some non-bank entity like a hedge fund, then don’t be a bank. Don’t let banks use their customers money to do anything other than traditional banking.” 

Writing in the New York Times, Obama Car Tsar and former Lazard Frere head Steven Rattner joined the finance industry swift reply to Weill’s treachery, arguing essentially that such banking activities should not be restricted, just regulated better, and that Glass-Steagall restrictions would put American banking out of synch with the rest of the world, where such restrictions do not exist. But in the rest of the world, international banks have traditionally been national banks, with governance and management closely aligned with national leadership.

American banking is unique, and is a reflection of the freer world of American capitalism. As the old saying goes, in Germany, what isn’t legal is illegal, while in America what isn’t illegal is legal. Glass-Steagall was important in America specifically because of the lack of essential trust and interconnection between the banks and the political sector, and the apparently reasonable concern that American banks could not be trusted as conservative stewards of public deposits.

Unlike European and Asian banks—whose roles and function in the world have traditionally been closely linked to the nations whose interest they serve—American banks are private organization that pursue their own interests and make no pretense of advancing nationalist interests—other than in acknowledging the essential role of banking to the functioning of the private economy. Accordingly, America has far more banks and resolution systems that presume that banks will fail as a matter of course. Or as Paul Ryan noted as his preamble to the comment above, “We should make sure you can’t get too big where you’re going to become too big to fail and trigger a bailout, and if you take risky behavior then you go into bankruptcy and we open up the bankruptcy laws to allow them to go into bankruptcy.”

As bad as the LIBOR scandal has been, the HSBC and Standard Chartered revelations are in their way deeper indictments of the state of international banking. HSBC and Standard Chartered are culturally rooted in the British Empire. As created by Queen Victoria, they were not simply institutions regulated by the state, but were arms of the state, chartered as essential tools of state policy.

Over the past decades, the dominance of the U.S. Federal Reserve Bank—combined with the failures of the European Union to develop effective, unified bank regulation—have led to a creeping Americanization of global finance. International banks, like Barclays, have found themselves run by American or American-trained chief executives, and their cultures have migrated toward the those of their large American counterparts, where trading and investment banking—and the higher compensation that those activities can generate—have undermined the traditional banking values focused on credit and long-term relationships.

Internal emails at Standard Chartered published in the New York Times, provide a hint at the awareness of bank managers of their own activities and the reputational risks that they were taking. According to one email, the Standard Chartered chief executive for American activities warned London that the Iranian activities had “the potential to cause very serious or even catastrophic reputational damage to the group.” The response was telling, “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians."

Back in the day, such a response might well have reflected directives from Whitehall that Britain was supportive of Iranian relations, and Standard Chartered need not curtail its activities in deference to the political priorities of their American cousins. But those days are long past. Like Barclays and the list of other LIBOR manipulators, Standard Chartered had no such defense. In today’s world, each bank is acting only on their own account, with traders focused on their own bonuses, and with little regard for the impact of their activities on the world around them.

The devolution of the venerable Victorian banks from instruments of the British state to instruments of individual self-interest is unfortunate, if not tragic. Those banks have lost their mission, their purpose and the tether to the national government that they were created to serve. Queen Victoria would not be pleased

But the problems are not Britain’s alone. It appears that we may be migrating toward the worst of both worlds. Even as global banks are loosening their traditional ties to their political masters, and migrating into trading activities delinked from their traditional banking focus in pursuit of greater compensation, our banks are increasingly tied to the political system. But here, it is not the political system that guides the banks toward areas of strategic national interest, but rather the other way around.  Through our open system of political funding, political influence increasingly appears to flow from the banks to the politicians, and from there up the latter of the political and regulatory apparatus.

Bold move.

Four months ago, a colleague high up in the Romney camp suggested in a conversation that Mitt Romney would run on a bold economic agenda to “inspire the middle to vote their disappointment.” “2010,” he noted, “was an anger-fueled wave turnout election. Unlikely that [this fall] R's will be as angry or D's as dispirited. The center is the way to win but he has to occupy that center with a bold agenda—a Bowles/Simpson level of boldness.”

Through the summer, no such boldness was apparent, and it has been unclear what kind of campaign Romney would actually run. Even as the Obama campaign launched a blitz of negative ads in swing states, the Romney campaign remained relatively quiet, clinging to benign themes, along with their own stable of negative ads. Now, as the conventions approach and the real start looms, Romney has finally shown his cards.

With the selection of Paul Ryan, Mitt Romney has made a definitive statement. Gone are the accusations that Romney would be afraid of a bold choice, afraid of being over-shadowed. Gone as well are the suggestions that his would be a tactical choice, driven by a narrow objective of winning 50%-plus-one electoral votes. Paul Ryan is a political star in his own right, and has proven his willingness to take on the toughest issues. By picking him, Romney is suggesting that the fall campaign will go beyond negative attacks and focus on real and substantive choices.

The instant response to the pick from the Democrat side has been to attack Ryan’s Medicare plan. That plan essentially proposes to keep the existing system intact for those over 55 and then migrate to a private insurance/voucher plan, ultimately ending Medicare as we know it. Opposition to that plan, interestingly, has focused on the costs that would be absorbed by future retirees under the voucher plan, rather than on the inequity of a plan that places no burden on current recipients and older workers in its effort to control the share of overall healthcare costs funded by government revenues.

Medicare is the fundamental challenge facing the U.S. budget, as it has steadily increased as a share of GDP. As federal income tax receipts declined in the wake of the 2008 fiscal collapse, healthcare costs increased dramatically as a share of the taxes individuals pay, growing from just over one-third of federal personal income tax payments before 2008 to well over one-half in recent years.

One might not like Ryan's solutions, but he has been willing to grapple with issues and offer detailed proposals where others have no not. His proposals have winners and losers, as any solution will. His Medicare plan shifts costs onto future beneficiaries, while effectively holding current retirees and older workers harmless, as it places the burden of paying for both current retirees and future retirees on those Americans now under 55.

Making younger workers pay a heavy price to support the retirement years of boomers has become a public policy theme of late. Across the country, state and local governments are reforming their pension plans in ways that reflect the Ryan formula. Retirees pay little or nothing, older workers pay some, but the real bailout comes from new employees. These solutions do little to tackle current costs, but instead promise changes down the road. They tend to alienate elderly voters less, while younger voters seem not to be paying attention. In a country where voter turnout is roughly correlated with age, this is a formula that combines fiscal and political viability.

The data on Medicare costs and benefits reinforces the fact that the problem is not simply one of overall cost. Research published by Eugene Steuerle and Stephanie Rennane of the Urban Institute suggests that while Social Security has been the more frequent target of reform efforts, that system is relatively sound. Most cohorts of households Steuerle and Rennane studied pay into the system as much or more than they ultimately receive in benefits. In contrast, Medicare taxes across all income groups pay only a fraction of the benefits people receive. The rest falls on the working population who essentially support retiree health costs, reinforcing generational inequity as costs rise.

The broader problem that America faces is a cultural problem. Cornell professor Suzanne Mettler has published useful data on this issue in her work on what she refers to as the “Submerged State.” Her data, presented here, suggests that a large number of Americans who benefit from public programs deny that they are indeed recipients of governmental largess. For example, 40% of Medicare recipients state that they have not used a government program, only slightly less than 44% for social security recipients who actually pay much of their own costs.

Mettler’s data suggests that the deep distrust of government that has long been a hallmark of the American psyche now rests at the center of our political and budget debates. It offers insight into how a man at a Sarah Palin rally in 2008 famously cried out “Don’t let the government get its hands on my Medicare.” Apparently Americans are able to reconcile their dislike or distrust of government by convincing themselves that those programs from which they themselves benefit are “not government.” Based on Mettler's data, it is apparent that the disconnect between what we receive and what we are willing to pay for runs deep.

And this is deep-seated problem. In the era of the Tea Party, the question of what government people want to have and what they are willing to pay for is a central one. Last year, the $1.4 trillion cost of Medicare, Social Security and defense expenditures alone—those that would appear to be sacred even to Tea Party acolytes—exceeded federal personal income tax payments by over $300 billion. This suggests that even if all other areas of government—the entire discretionary budget as well as Medicaid and other entitlements—were cut, the taxes we pay as individuals would not support those three areas of expenditure.

In coming months Paul Ryan will be decried for his Medicare plan and the burdens it will place on future retirees. Yet his plan is not alone in the intergenerational inequity on which it is constructed. None of the tax or budget proposals embraced by the Obama administration bridge the gap between what people appear to want and what they are willing to pay for either. The conventional wisdom remains that people will support tax increases on the other guy. But taxing the other guy—even all those rich people whose effective tax rates are far below those of middleclass workers—would not be sufficient to bridge the difference between what we appear to want, and what we appear to be willing to pay.

At some point, we will have to come to grips with the imbalance between what we appear to want and what we appear to be willing to pay. The interesting question now that Romney has selected Paul Ryan as his running mate is whether Romney is really proposing to engage in that debate, or whether the selection is merely a political calculus. Paul Ryan's entire political brand is premised on being the person who is prepared to engage those issues. Yet, there is no evidence to date that Ryan's Tea Party supporters have seriously considered what his proposed changes would mean for “their Medicare.” 

Mitt Romney and his campaign believe that the pivotal voters in the independent center—who have not yet made up their minds—will reward him for his choice of Ryan as his running mate, and the signal it sends that Romney is prepared to make hard choices to address the nation's economic and fiscal challenges. What remains to be seen is whether voters will recoil once they understand the details of Ryan's plan, or whether they are prepared to support candidates that offer solutions to problems that the electorate claims to want to see solved, however painful those solutions might be.