Friday, December 30, 2011
This is one of the interesting stories to tell, tracing her victory in the August straw poll to what is certain to be poor finish on Tuesday. She is hoping that the 45% undecided break and that she is the recipient. No chance. The numbers do not suggest it. As Gingrich has faded his support has gone in three directions–Paul, Santorum, and Romney. Moreover, she has little chance to recapture the momentum after her manager defected. Bachmann is already a political zombie–walking dead–before Tuesday and really cannot not do much next Wednesday baring a miracle. Even then, she has no infrastructure to go beyond Iowa.
Paul’s day in the sun.
Paul will do well and still may beat Romney. He has a loyal following of young much like Obama 08 and one issue will be whether with school out that helps or hurts him. Paul’s GOTV is terrific and it may carry the day. He has taken a hit with his 1990s newsletter but it is not clear what impact that will have. Paul will have legs beyond Iowa and he may be a gnat to Romney as the latter seeks to consolidate.
Gingrich as Mr. Nice Guy.
Who would have ever thought of Gingrich as Mr. Nice Guy? The attack ads worked on him and he did not respond. He failed to remember the rule–define or be defined. He let his past define him and has lost momentum in the polls.
One poll has Santorum in third. He has benefitted from the other conservatives collapse (including Bachmann) but does he have the organization actually to deliver bodies on Tuesday?
Iowa was a loser for Mitt but now he has a chance to win it and then New Hampshire the next week. He benefits from the mistakes of others and by being the consistent second choice of everyone else. In a field where there is some disarray perhaps simply holding on to 25% is enough.
What is left to say? He has put his foot in his mouth so many times his breath must smell like shoe polish. He has no momentum and appears to be spending all his money here with hopes like Bachmann that something breaks for him.
Are the GOP in trouble?
One dumb headline this past week said that there was a crisis with the GOP because going into Iowa there was no clear frontrunner or choice. Is it not the purpose of the primary and caucus system to select the nominee? It used to be that the conventions selected nominees and the crisis was if there were no clear favorite then. Then the fear was that going into the convention there was no clear favorite. Now it seems that there is a crisis if there is no favorite going into the caucuses and primaries. This is jumping the gun. Think of Iowa as the start of a decision-making process that is supposed to produce a nominee. The nominee is not supposed to be decided before the process starts.
Yet the GOP still face problems in terms of a message, perhaps nominating another Goldwater like candidate, and also via lack of support among Hispanics, Blacks, and other key constituencies in some swing states.
Remember once a Democratic candidate running for reelection with high unemployment, slow growth, a large deficit, and rising gas prices? This was Carter in 80. We all know the economy is not a great issue for Obama but gas prices may also hurt him, too. Reports this week suggest $4 gallon gas this summer. Spikes in gas prices will not help him. Look to see another potential tapping of the Strategic Oil Reserve this summer.
Saturday, December 24, 2011
Miscalculating the Payroll Tax
The most glaring event of the week was the misplaying of the House GOP vote on the extension of the payroll tax. In principle they may have been correct that a one year deal is preferable to a two month extension but they needed to act but did not. Perhaps they thought Obama would again capitulate like he did in August with the debt deal but the politics was very different then as opposed to now. In August failure to reach agreement meant a government shutdown, making Obama look hapless. This time no deal meant tax increases on the middle class and that would have stuck to the Republicans. Moreover, even the Senate Republicans–including Mitch McConnell and John McCain–pressured the House to assent to the deal. The House GOP here simply overplayed their hand and lost.
Obama the Economist Populist
Contributing to the miscalculation is the traction Obama has received in running as an economic populist. He has given two major speeches in the last few months describing himself as a man for the people. The first was his $450 billion jobs speech a few months ago and the other was his recent Osawatomie, Kansas speech. In both he talked of the need to help the middle class. Both were fine speeches, but talk is cheap.
Obama rightly so should be criticized as the Democrat who abandoned the middle class and the poor. He continued the Bush policy of bailing out the banks and he has put more emphasis on stabilizing the financial sector than he did in helping home owners and the working class. While his original stimulus bill did help, I argued after the 2010 elections that his failure has been to appear to side more with the banks than the people. Given how much he took from Wall Street in 2008 to finance his campaign, no surprise here.
But Obama has been lucky. Occupy Wall Street and the “We are the other 99%” campaign have helped him. Both shifted focus to the Republicans in Congress and running for president that there is a clear class divide in America. Previous blogs of mine have attested to this fact and the growing economic divide in America over the last 30 years. Congressional refusal to raise taxes, a Republican presidential debate revealing no candidate willing to raise one dollar in taxes for every ten dollars in spending cuts, and the failure of Congress to enact Obama paltry $450 billion jobs bill all make it clear that they do not care about the American people (had they enacted the bill they could have disarmed the president and still pointed to how they supported the president on all his major economic programs but they still failed).
The point is that Obama can look like an economic populist because of the failures of Congress and the GOP to offer a credible alternative and to play politics in a way that makes them look like they care for anyone besides the top 1%. Obama is winning because of the implosion of the Republicans.
The Dismal Presidential Choices
Obama is also benefitting from a Republican presidential field that is not a varsity or junior varsity but the freshman team. It is a team running increasingly further and further to the right. A team that is further to the right than the Reagan Party–it is the Palin Party still as I wrote about several times t his year. It is a party that has flirted with several conservatives–Bachmann, Perry Cain, Gingrich, and now maybe Paul as the preferred choice over the more moderate but lackluster and passionless Romney. They seem out of touch with America in their talk of tax cuts, privatization, and return to the gold standard.
Now with little more than a week before Iowa, the race is definitely up in the air. Recent polls confirm what I asserted in an interview last week that Paul, Gingrich, and Romney will be the order in Iowa come January 3. But even if Paul does not win, his ascendency is a problem for the Republicans. If he does well in Iowa is libertarianism will play even better in New Hampshire and Romney needs to worry about a relative poor showing there on his part. This year with the Republican primaries and caucuses allocating delegates not by winner-take-all but proportionally, unless there is a quick kill by one candidate in January, look to a long primary and a potential brokered convention.
So What Does All this Mean for Obama?
Obama is now in much better shape in the polls for reelection than he was a few weeks ago. Polls have his approval rating up to 49% and it now exceeds is disapproval rating. He has a 7 point lead over Romney and much larger leads over the other Republican candidates. Congress’s approval is under 10% and public approval of the Tea Party has weakened. There are small signs of economic improvement but certainly no indication of real growth or significant decreases in unemployment in 2012. The economic news and prospects should doom him and the Electoral College road to reelection is complicated, but Obama now has a clear lead in Florida.
But compared to the Republicans running for president and those in Congress, he looks good. Obama can run for reelection on a slogan of “No matter how bad I am look at the alternative.”
Merry Christmas President Obama! Your present came wrapped with Republicans in a box they are building themselves in.
Thursday, December 22, 2011
Does character count? Stories of New Gingrich’s three marriages and Minnesota Senator Amy Koch’s “inappropriate relationship” with a staffer have again thrown that issue into the news. Whether these private acts or activities should be considered when evaluating public officials fitness for office raises difficult questions about where personal character fits in. Is there no privacy for public officials? Is everything fair game for the voters to ponder when selecting or judging candidates for public office? The simple answer is that character matters, but how and under what circumstances is really the issue.
“Character” is an elusive term. In political parlance it seems to refer to many variables including one’s personal conduct and morality. Supposedly Gingrich’s three marriages and Koch’s inappropriate relationship tell us something about fitness for public office. Maybe simply being unethical in one’s private life is enough to exclude one from public office. But it is not always clear how public and private morality connect.
Character, as Aristotle would declare, refers to habits. To do something once–steal–does not make one an unethical person. We all err. None of us are perfect. But occasional falls from grace do not render us ethically bad. However at some point acts become habits–what we do is a reflection of who we are–and we then can be judged to be unethical or bad when it speaks to our character–when it is a habit of the heart.
But judging when transgressions are habits that form character and when they apply to fitness for office is complex. One of the worst forms of character assassination is dredging up something from a candidate’s past as a way to judge them presently. All of us do dumb things when younger that we regret and the mark of maturity is learning and growing from them. We cannot judge our life as if all our choices were made at the present time.
Past choices might tell us something about the present, but they need to be assessed in terms of how we have grown from them. Not to do that condemns all of us to be ever judged from our youth or an earlier point in time that we may or may not have growth from.
When do past bad ethics form a basis of a present unethical character? Here is where the issue of judgment fits in. Many jobs have technical skills that are required for proficiency. Being a doctor, plumber, or electrician come to mind. But many also require the capacity to make good judgments–often ethical choices. This is the case with elected officials called upon to make decisions about public welfare and the common good. Elected officials are not simply delegates voted into office to do the bidding of the majority. They are elected in part as Edmund Burke pointed out to make good judgments on behalf of their constituents. Citizens are not fully informed about all issues because of time and other factors. The purpose of a representative system is to allow public officials to serve as trustees for the people–rendering their judgments in a way that they can act in the public interest. This trustee relationship necessitates good judgment.
The public is most certainly entitled to consider character as it relates to making good judgment when it comes to determining fitness for office. Here is where personal morality comes in.
Does Gingrich’s three marriages speak to his fitness to be president? Maybe. If those marriages speak to his present character and judgment as president then yes. But even more needs to be asked. Americans rightly hate hypocrisy. Saying one thing and doing another is hypocritical. Making oneself an exception to rules of conduct that is expected of others is the core of being unethical and hypocritical. Gingrich’s 1994 Contract for America demanding that Congress be held to the same standards of conduct others are expected to follow was correct. The problem for Gingrich is that his views on marriage, gay rights, and perhaps even abortion seem at odds with his own personal life. His personal character places into play the right of the public to ask how he can reconcile his own personal code of conduct with the political positions he espouses. This connects to his judgment and the former House Speaker should as part of his campaign clarify how all of these relate to his capacity to make good judgments as president.
Similarly, Amy Koch’s behavior speaks to her fitness for office in at least a couple of ways. The allegations are that the inappropriate behavior implicates a sexual relationship with a Senate staffer. Most of us have learned at work that supervisors should not date subordinates since such relationships raise concerns of favoritism, sexual harassment, and hostile work environments. Senator Koch should understand that. Not to do so and to engage in an ostensible sexual relationship with a subordinate raises questions about good judgment.
But more importantly, Senator Koch is married and she led a Republican chamber last spring that adopted and sent to the voters a constitutional amendment banning same-sex marriages. That amendment rendered a judgment about marriage and the personal morality of others. It is hypocritical that while this amendment was being debated she might have been engaged in a inappropriate relationship at work. Unlike Gingrich where his three marriages and affairs took place in the past and presumably he might have grown and learn from them and he is now a changed person–as he contends–Koch’s behavior is not in the past but now, merging her private and public lives but in terms of the judgments she is making presently as senator and also because of the relationship taking place with a Senate staffer and subordinate. It is all of these facts coming together that place her character and judgment in play.
Wednesday, December 14, 2011
- Iowa polls show a state up for play. Romney and Perry are dumping millions in to the state in a battle that is less about substance and policy than character. Character looms larger because the real policy differences among the candidates are trivial.
- Bachmann’s Saturday debate line of casting Gingrich and Romney together as “New Romney” was politically brilliant. It turns Gingrich into a moderate and makes her the sole conservative alternative. She will drive this message home for the next few weeks.
- Gingrich is the repentant sinner. What better way to make political advantage out of one’s character flaws by admitting the errors, admitting one’s sins, and asking forgiveness. The repentant sinner plays well with religious conservatives.
- Ron Paul wins Iowa? It can happen. He almost won the straw poll in August and he has a strong dedicated group of followers. He has money and organization. Is he the new flavor of the month emerging? Look to see a potential surprise victory her and if so, look to see him do well in New Hampshire–a state more supportive of his libertarian views. Again do nor rule out a Paul third party bid.
- Huntsman as Gingrich’s VP? Yes, the two person debate demonstrated they can work together. Huntsman is the favorite Republican of Democrats and he appeals to swings. He appeals to westerners and moderate east coast Republicans.
- Romney: I bet you $10,000 that he damaged himself on Saturday and now that he is part of the fray he will get bloodied by the character battles. He needs to change is narrative and fortunes and that is not coming soon.
- Bachmann has a trickle of an opening after Saturday and her 99 county tour of Iowa is meant to whip up political support and recapture lost conservatives. Media profile is good but Iowa is about delivering real bodies on caucus night and get out the vote efforts and ground wars are more important now than airwars.
Thursday, December 8, 2011
Don’t Hate Me Because I’m Mitt
Mitt Romney has had an identity problem from the get go. Best summed with the label “Multiple Choice Mitt,” Romney faces an initial problem that no one knows where he really stands on the issues. He is a former moderate Massachusetts governor who supported reproductive rights, gay rights, and he signed into law a health care bill essentially identical to Obamacare. Romney is a skilled businessperson and politician who saved the 2002 Olympics. He knows how to get things done. This should be his political narrative for his presidential campaign. But it’s not.
In 2008 Mitt ran away from this narrative. He pandered to the conservative base of the party, renouncing his moderate positions. Yet given the global economic collapse and John McCain’s avowal that he did not understand economics, had Romney stressed his business experience then he might have won the nomination. Now in 2012 as the Republican Party has moved further to the right Romney has abandoned even more of this narrative, seeking to out-duel the other presidential contenders in terms of xenophobia against immigrants, bashing gays, abortion rights, and taxes, or in renouncing health care reform. Mitt both wants to be the can do governor and businessman and the right wing extremist. No one really trusts him anymore–especially the Tea Party base–thus the moniker Multiple Choice Mitt.
But Mitt also suffers from another flaw–he is a pretty boy. Pantene shampoo famously featured a 1990 commercial with Kelly LeBrock who cooed “Don’t hate me because I am beautiful.” Mitt may be hated for that reason. He is rich, handsome, has perfect hair, and a trophy wife. All reasons to hate him because he has it all. Few can identify with him because of that. Voters bonding with presidential candidates is important. In 2004 voters preferred Bush over Kerry because the latter came across as an aloof prig.
Mitt also has another identify problem–no charisma. He is wonkish and more of a technocrat. He is reminiscent of another former Massachusetts governor–Michael Dukakis–who was similarly skilled but also boring. Politics is about passion and no one can really get passionate over Mitt.
Romney, though, has labored to make a virtue out of all of this. Be the viable second choice who outlasts everyone else in the race. Manage the best campaign, raise the most money, site the most offices, and script the best choreographed speeches. Romney’s strategy is to be the “steady Eddy”; be the one true love or candidate who is there for you after the quick romances and one night stands for the others pass by. Romney’s strategy–Mr. Inevitable.
But why Newt?
He’s not Romney. That is only part of the appeal. The other part of the appeal is that he is the last candidate standing. Gingrich appeared to flame out early before it became fashionable for the other Republican contenders to do so. Stories of infidelity, million dollar credit lines at Tiffanys, growling at the media, and a campaign staff quitting en masse; Newt was just ahead of his time. Since then we have see the other flavors of the month, as the media calls them, rise and fall. Trump. Bachmann. Perry. Cain. Each had an Andy Warhol 15 minutes but each faded as the presidential debates and vetting process grinded on. But eventually each undid themselves. Who was the last one standing? Not Romney, but Gingrich.
Most importantly, Gingrich is actually Mr. Reliable. Unlike Romney where no one knows where he really stands, everyone knows Gingrich and his views. His reliability is a political virtue compared to claims of inevitability. Gingrich was there with the Contract for America in 1994. He led the impeachment against Clinton in 1998. He carries the mantle of the Reagan brand. He is a known and dependable conservative. Yes he is full of warts, but unlike Cain and others, he admits them and says it’s time to move on. Americans hate denial or lying but can accept sinners and that is what Gingrich understands.
Conservative Republicans distrustful of Romney and not liking the other choices finally came back to Gingrich. He is more than the flavor of the month. But even if he is, it is good to be the flavor when it is your month and with it being T-minus less than a month to the Iowa caucuses. The timing is great. Gingrich leads in Iowa, South Carolina, and Florida, three of the first four contests. He is behind in New Hampshire but picked up the critical Union Leader newspaper endorsement. Romney was expected to win big in New Hampshire. He may still win but unless it is a blowout he will look vulnerable.
What is happening now with Gingrich is different than what transpired with Bachmann, Perry, and Cain. What is now occurring is the coalescing of the party around him. Cain’s endorsement is a sign, look to see others also endorse him as they leave the race early in January (except for Ron Paul who will potentially run again as the third party Libertarian candidate and complicate GOP strategy). By the end of that month look to see a race between Gingrich and Romney. Beyond January, the task will be organization, money, and momentum. Right now Romney has the first two but not the third. Gingrich has the third but not the first two. His challenge is taking his momentum and the passion around him to create the organization and money he needs to win the nomination. If he can do that, Romney is done.
Wednesday, December 7, 2011
Yes, the economy produced 120,000 new jobs. That appears to be good news, but not really. The country is millions of jobs away from re-creating all of the positions lost since 2008. Millions of additional jobs are also required for new workers entering the labor force. The economy needs to produce perhaps 300,000 or more new jobs per month for several years before the loses of 2008 are recaptured. This would require economic growth far greater than the 2–2.5 percent increase projected for the near future.
Friday, December 2, 2011
- Do nothing. The surplus is illusionary and may vanish or change dramatically before the next fiscal forecast by the end of February, 2012.
- Save it. Bring up the state’s rainy day fund.
- Save it for the deficit in 2013-14 budget.
- Use the money to pay off the interest and borrowing off of the tobacco endowment.
- Repay the money borrowed from K-12.
- Restore the cuts to the homestead tax credit.
- Restore local government aid funding.
- Restore health and human services cuts.
- Tax cuts for businesses and wealthy to create jobs.
- Money for the Vikings stadium.
Thursday, December 1, 2011
Since the end of World War II two business models have defined the operations of American higher education. The first was the Dewey model that lasted until the 1970s. The second, a corporate model, flourished until the economic crash in 2008. What the new business model for higher education will be is uncertain, but from the ashes of the status quo we see emerging one that returns to an era before World War II when only the affluent could afford college and access was limited to the privileged few.
Model I: The Dewey University
The first post-World War II business model began with the return of military veterans after 1945 and it lasted though the matriculation of the Baby Boomers from college in the 1970s. This was a model that produced an ever expanding number of colleges for a growing population seeking to secure a college degree. It was a model that coincided with the height of the Cold War where public funding for state schools was regarded as part of an important effort to achieve technological and political supremacy over communism. It also represented the expansion of more and more middle and working class students entering college. This was higher education’s greatest moment. It was the democratization of college, made possible by expansion of inexpensive public universities, generous grants and scholarships, and low interest loans.
Public institutions were key to this model. They were public in the sense that they received most if not all of their money either from tax dollars to subsidize tuition and costs or federal money in terms of research grants for faculty. The business model then was simply–public tax dollars, federal aid, and an expanding population of often first generation students attending public institutions at low tuition in state institutions. Let us call this the Dewey business model, named after John Dewey, whose theories on education emphasized the democratic functions of education, seeking to inculcate citizenship values though schools.
Model II: The Corporate University
Yet the Dewey model began to collapse in middle of the 1970s. Perhaps it was the retrenchment of the SUNY and CUNY systems in New York under Governor Hugh Carey in 1976 that began the end of the democratic university. What caused its retrenchment was the fiscal crisis of the 1970s.
The fiscal crisis of the 1970s was born of numerous problems. Inflationary pressures caused by Vietnam and the energy embargoes of the 1970s, and recessionary forces from relative declines in American economic productivity produced significant economic shocks, including to the public sector where many state and local governments edged toward bankruptcy.
Efforts to relieve declining corporate profits and productivity initiated efforts to restructure the economy, including cutting back on government services. The response, first in England under Margaret Thatcher and then in the United States under Ronald Reagan, was an effort to retrench the state by a package that included decreases in government expenditures for social welfare programs, cutbacks on business regulations, resistance to labor rights, and tax cuts. Collectively these proposals are referred to as Neo-liberalism and their aim was to restore profitability and autonomy to free markets with the belief that unfettered by the government that would restore productivity.
Neo-liberalism had a major impact on higher education. First beginning under President Carter and then more so under Ronald Reagan, the federal and state governments cut taxes and public expenditures. The combination of the two meant a halt to the Dewey business model as support for public institutions decreased and federal money dried up.
From a high in the 1960s and early 70s when states and the federal government provided generous funding to expand their public systems to educate the Baby Boomers, state universities now receive only a small percentage of their money from the government. In 2004, the State of New York constituted only 29% of SUNY’s funding and 31% for CUNY. As of 1998, New York spent more on its prisons than on higher education. In 1991, 74% of the funding for public universities came from states, in 2004; it was down to 64%, with state systems in Illinois, Michigan and Virginia down to 25%, 18%, and 8% respectively. Since then, the percentages have shrunk even more, rendering state universities public institutions more in name than in funding.
Higher education under Neo-liberalism needed a new business model and it found it in the corporate university. The corporate university is one where colleges increasingly use corporate structures and management styles to run the university. This includes abandoning the American Association of University Professors (AAUP) shared governance model where faculty had an equal voice in the running of the school, including over curriculum, selection of department chairs, deans, and presidents, and determination of many of the other policies affecting the academy. The corporate university replaced the shared governance model with one more typical of a business corporation.
For the corporate university, many decisions, including increasingly those affecting curriculum, are determined by a top-down pyramid style of authority. University administration often composed not of typical academics but those with business or corporate backgrounds had pre-empted many of the decisions faculty used to make. Under a corporate model, the trustees, increasingly composed of more business leaders than before, select, often with minimal input from the faculty, the president who, in turn, again with minimal or no faculty voice, select the deans, department heads, and other administrative personnel.
The corporate university took control of the curriculum in several ways in order to generate revenue. The new business model found its most powerful income stream in profession education. Professional education, such as in public or business administration, or law school, became the cash cow of colleges and universities. This was especially true with MBA programs. Universities, including traditional ones that once only offered undergraduate programs, saw that there was an appetite for MBA programs. The number of these programs rapidly expanded with high-priced tuition. They were sold to applicants that the price would more than be made up in terms of future income earnings by graduates.
This business model thus used tuition from graduate professional programs to finance the rest of the university. Students either were able to secure government or market loans or those from their educational institution to finance their training. Further, the business model relied heavily upon attracting foreign students, returning older Baby Boom students in need of additional credentials, and recent graduates part of the Baby Boomlet seeking professional degrees as a short-circuit to advancement.
This model accelerated with the emergence of the Internet, on-line classes, and was especially perfected with the propriety for-profit schools. In the case of the expansion of on-line programs over the Web or internet, a specialist designs the curriculum for courses, sells it to the school, and then the university hires adjuncts to deliver the canned class. Here, the costs of offering a class are reduced, the potential size of the classes are maximized, and if and when the curriculum needs to be changed to reflect new market needs or preferences, it is simple to accomplish. Traditional schools, seeing this model flourish, began emulating it, expanding on-line programs, often with minimal investments in faculty.
A second way higher education became corporatized was in the increased funding streams from corporations. These funding streams became necessary as a result of decreased public support funding for higher education. One way schools have become more dependent upon private funding is simply by turning to corporate donors either to contribute directing to them, or by way of naming, that is, giving private corporations the right to donate in exchange for naming some part of a school after them. For example, in recent years many business schools have adopted famous names of companies in return for donations or sponsorships.
Overall, the new business model relied heavily upon the expansion of pricey professional programs sold to traditional and non-traditional students who financed their education with student loans. This model took off with the Internet, and was facilitated by a management structure and partnering that drew higher education into closer collaboration and dependence upon corporate America.
The Collapse of the Corporate University
The corporate business model worked–until 2008–when it died along with the Neo-Liberal economic policies that had nourished it since the late 1970s. The global economic collapse produced even more pressures on the government to shrink educational expenditures. But the high and persistent unemployment also yielded something not previously seen–the decline of students seeking more education. The decline came for two major reasons. First, Baby Boomer were aging out into retirement, no longer needing educational training. With that, the Baby Boomlet had run its peak, with the American pool of potential students rapidly decreasingly. In effect, the demand for education had dropped.
Second, traditionally MBA and other professional degrees flourished in tough economic times as individuals used their unemployment as the opportunity to get retrained. But since 2008 that has not happened, in part because of the persistent high unemployment and rise of consumer debt.
Unlike previous post World War II recessions, the most recent one has dramatically wipe out the wealth of consumers–some $13 trillion in wealth was lost–and consumer debt has skyrocketed. Student loan debt has also ballooned and is now greater than personal consumer debt–$829 billion compared to $826 billion. The average student loan debt for a graduate of the class of 2010 exceeds $25,000. In effect, potential students are tapped out–they have no money to finance further education, they see that companies are not hiring, and overall, find little incentive to debt finance for jobs that may not exist. The result? A crash in applications to graduate professional programs including MBA and law schools. From 2009 to 2010, MBA and law school applications declined by 10% for full time programs.
The corporate business model has crashed. It was a bubble that burst much like the real estate one that burst in 2008. But in actually, it was a model waiting to burst. The corporate business model functioned as education Ponzi scheme. Higher education paid for programs by raked in dollars from rapidly expanding professional programs and selling degrees on the promise that the high tuition costs would be worth it to students. But as all Ponzi schemes go, they soon collapse and that is what higher education is now experiencing.
The Next Business Model?
But what is the next business model? In a foreseeable era of high unemployment, decreasing public funding for education, and persistent consumer debt, significant retrenchment will occur along a few models. For one, a few elite universities will continue to exist, serving elites who can afford to pay the privilege of attending them. This model negates the democratic function of higher education that existed since World War II.
Second, expect significant collapse and merger of weaker institutions as they seek to find ways to complete for a dwindling student population and resources. This model decreases access to higher education as the range of college and university choices decrease.
Third, while many for-profit institutions may not be able to withstand market pressures, look to see many traditional colleges and universities will have no choice but to emulate that management style. It may not be a viable business model but given economic pressures for the future, that may be the only one that exists, rewarding a few schools that are able to provide a curriculum that is cheap enough that students want to attend. In effect, the new business model is a hyper-extension of the current model. This may mean even more alliance with corporate America along with curriculum pressures that further de-emphasize traditional liberal arts studies in place of professional education. One sign of that already is the movement to take professional degrees such as MBAs and now offer BBAs instead.
Likely business models for higher education are not good. They threaten to erode the strengths that American higher education enjoyed for years, while at the same time not articulating a plan that is financially sustainable.
Sunday, November 27, 2011
Thursday, November 17, 2011
Occupy Wall Street (OWS) is a cacophony of voices speaking a simple message about the structural economic and political inequalities in America and around the world. Sharing affinities to the 1999 World Trade Organization protests against globalization, OWS looks to the growing power of global financial institutions and their stranglehold on governments around the world.
OWS points to how the Bush and the Obama administrations loaned or credited trillions to banks and the too-big-to-fails to bail them out after they gambled on Wall Street, only to see homeowners face record losses in their houses and illegal foreclosures by these institutions. Tax breaks and loans were provided to the big auto companies but little was done to help the unemployed. The banks of Europe were recapitalized by the International Monetary Fund and the European Central Bank, but Greece and Italy was compelled to take the so-called "haircuts." Democracy has taken a backseat to saving capitalism. This is the message of OWS.
While Rome and the rest of the world burn, Nero fiddles. At least in this case, the fiddling is done by the Republican presidential candidates, who assert that all that ails the economy can be cured by more tax cuts and free markets. But while the GOP fiddles, a host of interesting studies have come out documenting and criticizing the ideology of Herman Cain, Michele Bachmann and company, as well as offering some insights into the state of the American economy. These reports are worth noting since they have received scant notice in the mainstream media.
The rich are getting richer, the poor poorer, no matter how you examine it.
In October a Congressional Budget Office report documented the growth in income in the United States from 1979 to 2007. For those in the top 1 percent bracket, their income increased by 275 percent. For those in the top 20 percent, it increased by 65 percent, for the middle incomes it was a 40 percent increase, and for those in the bottom 20 percent it was scant 18 percent. In 2010, the census reported the richest 5 percent of the population accounted for 21 percent of the income, with the top 20 percent receiving over 50 percent of the total income in the country.
Moreover, the latest census figures point to a poverty rate in 2010 of 15.1 percent, representing a record 46 million people in poverty. But earlier this month the US Census Bureau issued a new report recalculating what constitutes poverty — noting that current estimates are based on an outdated methodology from 1960s. This measure for calculating poverty did not include government transfers (welfare) or tax cuts when making estimates, and it also did not reflect the current spending patterns of Americans. Using new measurement tools, which the Census Bureau calls the "supplemental measure of poverty," the study concluded that the poverty rate is actually 16 percent — higher than the old estimate — constituting more than 49 million individuals in poverty. So much for welfare queens getting rich on the system.
The rich and poor live in separate worlds.
There is a geographic basis to poverty. Generally the assumption is that poverty is concentrated to the urban cores of major cities. One way to measure the spatial dimension to poverty is to use census data. Census tracts where 25 percent or more of the households live in poverty are referred to as high-poverty neighborhoods, and those with 40 percent or more of the households in poverty are referred to as extreme-poverty neighborhoods. Concentrated poverty is a problem because of the issues surrounding low economic opportunity, high government social service costs, and crime.
Looking at concentrated poverty across the United States, the Brookings Institution recently concluded that 10.5 percent of all individuals lived in extreme-poverty neighborhoods, up from 9.1 percent in 2000. Estimates are that more than 15 percent overall live in concentrated-poverty neighborhoods, with the most rapid growth occurring in the suburbs. The Twin Cities metro region is not immune, with 9.4 percent of the population living in concentrated poverty neighborhoods that include some suburbs but mostly the Minneapolis-St Paul urban cores. These trends parallel 2000 census data demonstrating the gravitation of poverty from the cities to the inner ring suburbs, creating really a two-tiered metro region marked by affluence and poverty.
Similarly, in the just released Stanford University/Russell Sage Foundation’s “Growth in the Residential Segregation of Families by Income, 1970-2009,” researchers found that America was becoming increasingly segregated by income. In 1970 only 15 percent of families were living in affluent or poor neighborhoods, but in 2007 it was 31 percent. They researchers also found that high-income households were less likely to be found in mixed-income neighborhoods than the rest of the population. In general the percentage of Americans dwelling in middle-income neighborhoods was dwindling and, in fact, these types of residential neighborhoods were shrinking.
Overall the study noted the increased economic and racial segregation in this country, with individuals of different classes less and less likely to come into contact with those from other social-economic backgrounds. America has become a tale of two cities.
Taxes really are not job killers.
The canned line from the Republican candidates has been this: high taxes are killing the economy and forcing companies out of business. Three reports again reject this contention.
The Bureau of Labor Statistics compiles data on reasons for mass layoffs. In its most recently survey, which covers 2010 and 2011, factors such as cancellation of a contract or order for goods, insufficient demand for products and increased automation account for the vast majority of layoffs. High taxes do not even appear on the list as a reason.
Second, the National Federation of Independent Business (NFIB) recently completed a survey asking small businesses to identify the single biggest problem they face. Taxes came in third, with poor sales listed as the biggest issue.
Third, the Citizens for Tax Justice recently released a report, “Corporate Taxpayers & Corporate Tax Dodgers,” documenting the biggest businesses that have failed to pay their fair share of taxes. Among the worst offenders, corporations such as GE, DuPont, Boeing, and Wells Fargo paid no income taxes from 2008-2010, let alone the theoretical 35 percent statutory corporate rate. The Citizens for Tax Justice report documents scores of blue-chip American companies that failed to pay any taxes during these three years, questioning the claim that high taxes are depressing employment and their economic growth.
Moreover, in addressing the arguments made by Herman Cain and others that high corporate tax rates discourage American companies from repatriating $1.2 trillion in money being held overseas, the Corporate Taxpayers study points out that corporate tax rates in other countries are often significantly higher. Additionally, if there is a tax advantage to off-shoring jobs it comes only because American law allows for a permanent deferral on foreign profits. The solution is simple: repeal the deferral and do not allow corporations to use the tax code as an incentive to out-source. Overall, the United States government is facilitating this problem by adopting policies that encourage evasion.
The message from all these studies point to a nation increasingly divided by income, region, and class. They point to a country where the rich pay little taxes or better yet, are able to use the tax code to their advantage — and to a world where in reality, unemployment and slow economic growth are not due to high taxes but to other factors.
Occupy Wall Street is about highlighting these facts, seeking to reintroduce the simple concept that capitalism is meant to facilitate democracy and not vice versa.
Saturday, November 12, 2011
The basic problem is the economy. Only 80,000 jobs were added in October, placing the unemployment rate at 9.0%. The Federal Reserve Board projects slow economic growth next year–2-2.5%–with the unemployment rate settling in at about 8.5% by election time. Of course these numbers are bad for all those looking for jobs or businesses hoping to grow, yet for Obama it is a real problem.
Since 1932 only two presidents have ever won re-election when the unemployment rate was above 6%. In 1936 and 1940 Franklin Roosevelt won reelection with unemployment rates of 17% and 14.6%, but both of these elections should be treated as outliers or oddities. In 1936 the unemployment rate had dropped from nearly 24% to 17% and the economy was growing at an annual rate of 14%. In 1940 World War II was upon America and with patriotism high, support for Roosevelt was strong. More importantly, the economy was growing at 10% but the perception was that the president had the country going in the right direction.
In 1984 Ronald Reagan won re-election with an unemployment rate of 7.5%. Yet his victory occurred when the economy was growing at more than 11% and gas prices were tumbling from then record highs. Reagan definitely benefited from the perception that it truly was morning in America, especially after the unemployment rate tumbled from around 10% in 1982 and 1983.
But FDR and Reagan aside, high unemployment–six percent or more–is the death knell for a presidential re-election bid. In 1976 Gerald Ford ran for re-election when the unemployment rate was 7.7%–he lost to Jimmy Carter. Four years later the unemployment rate was 7.1% when Carter ran for a second term against Reagan. He lost to the tune of Reagan asking Americans if they were better off now than they were four years ago. In 1992 George Bush sought a second term with an unemployment rate of 7.5%–he lost to a Bill Clinton reminding the voters that it was “the economy stupid.” Conversely, Nixon won with an unemployment rate of 5.6% in 1972, Clinton 5.4% in 1996, Bush in 2004 with 5.5%, Eisenhower 4.1% in 1956, and Truman in 1948 with 3.8%.
Obama faces an economy where the best projection is of high unemployment and low economic growth. But there is more. Home values remain about 25% or more below what they were in 2008, consumer and now student debt is high, and many people have already blown through their unemployment benefits and face an uncertain future. Consumer confidence remains near historic lows, suggesting little chance that retail sales and spending for the coming holidays and into next year will revive the economy. The public just does not believe the country is headed in the right direction and few think we are better off now than four years ago.
History suggests Obama will lose. This assumes the Republicans put up a viable candidate with a compelling narrative. Yet so far that task seems elusive. Bachmann has come and gone. Perry has gaffed himself to death. Cain’s numbers place him in the GOP lead, but his negatives are escalating as it becomes more apparent that he is a misogynist who treats every woman in a demeaning fashion. Romney is boring and the Republican base does not really know where “multiple choice Mitt” stands on the issues. Gingrich is too acerbic. Congressional approval is less than 10%, with the public placing more blame on the Republicans than Obama for the gridlock in Washington. In short, the Republicans have the Democrats' disease—they are poised to snatch defeat from the jaws of victory. Obama can still win—he has money, the bully pulpit, and demographics that place perhaps as many as 200 or more electoral votes in easily into his presidential win column without too much effort. Now all he needs is the narrative for his re-election.
Obama hopes for a rerun of the 1948 Truman surprise victory over Dewey, campaigning hard as an economist populist against a hapless elitist. Yet the 1948 campaign featured an economy far better than 2012 so the parallels here might not be good.
Obama is also running on the fear factor—Hope that the American public will be afraid of an extremist Republican president presiding over a Republican Congress. Fear came be a powerful too, but 1980 demonstrated with Carter was up for re-election, fear of a crazy Reagan who would blow up the world was pushed aside by the desire for change and disgust with the status quo. Obama knows the public wants change—as he promised in 2008—but it is hard to run on that narrative when you an incumbent seeking re-election. He needs to navigate a message that promises change while staying the course with him. It’s a hard task—made only more difficult by the unemployment numbers—but Reagan and FDR did it, and now Obama needs to figure out how to channel their magic to do the same.
Saturday, November 5, 2011
Monday, October 31, 2011
Yet do high taxes really hurt the economy as much as they believe, and will lowering them have much of an impact on stimulating it? The economic literature is clear — tax breaks to encourage economic relocation or investment decisions are inefficient and wasteful. Hundreds of studies reach this conclusion. When businesses are surveyed regarding factors important to their investment decisions, taxes often come in behind proximity to markets, suppliers, and the quality of the labor force. These other factors occupy a larger percentage of a business's budget than do taxes, and all of them are far more critical to long-term success than are taxes. Businesses occasionally admit this. Nearly 62 percent of those interviewed in a California study on hiring tax credits indicated that they had never or rarely affected their decision to employ individuals. Speaking at a recent chamber of commerce event, I asked business leaders whether the Obama tax cuts would encourage them to hire. Unanimously the response was no—they were unwilling to hire until such time that consumers were willing to buy their products and services.
Anecdotal stories and illustrations also confirm the tax fallacy. High tax states such as Minnesota have generally fared better in terms of economic growth, unemployment, median family incomes, and location of Fortune 500 companies, than low tax ones such as Mississippi and Alabama. In many situations high taxes, and with that, government expenditures on education, workforce training, and infrastructure, correlate positively with income, low unemployment, and business retention. One needs to look not just a one side of the equation—taxes—but the other side too—what taxes buy—to see what value businesses get out of them in terms of educated workforces and infrastructure investments. Most debates fail to do this.
Bureau of Economic Analysis statistics demonstrate how economic growth is related to tax rates. One can compare annual economic growth as measured by the percent change in the gross domestic product (GDP) percent based on current dollars to the highest federal individual tax rate and the top corporate tax rate since 1930. If taxes are a factor affecting economic growth, one should see an inverse relationship between growth of the U.S. economy and higher tax rates. The GDP should grow more quickly when top individual and corporate tax rates are lower. If taxes are a major factor deterring economic growth, lines on a graph should go in opposite directions: As tax rates go up the GDP should go down.
No such pattern emerges between high taxes and GDP growth over 80 years. During the Depression of the 1930s corporate and individual taxes rates increased, but in 1934 through 1937 the GDP grew by 17%, 11%, and 14% annually. Top corporate tax rates climbed to over 50% through the 1960s, again with no discernable pattern associated with decreased economic growth. The same is true with top tax rates on the richest which were 91% into the 1960s. Conversely, since the 1980s after Kemp-Roth and then after 2001 with the Bush era tax cuts, there is no evidence that the economy grew more rapidly than in eras with significantly higher tax rates on the wealthy and corporations. Looking at time periods when tax rates were at their highest, GDP often grew more robustly than when taxes were cut. Visually, the attached graph simply fails to demonstrate that tax rates negatively impact economic growth. (Click on the graph to get a better view of it).
Pictures are worth a thousand words, but statistics are priceless. Statistically, if a tax hurts economic growth, the correction with it is -1. If they positively facilitate growth the relationship is 1, and if they have no impact the relationship is 0. The correlation between GDP and top individual taxes is 0.29, between GDP and top corporate taxes is 0.32, and among the three it is 0.14. Statistically, there is a slight positive impact on either top individual or corporate taxes or economic growth, but overall almost no connection between tax rates on the wealthy and corporations and economic growth in the United States.
But what about taxes as job killers? Again running similar statistical tests, there is little connection. Using Bureau of Labor Statistics data on unemployment rates since 1940, the correlation among top individual and corporate taxes and the annual unemployment rate is -0.02—essentially no connection at all.
The simple claim of Perry, Cain, and others that high tax rates on the wealthy and corporations hurt economic growth and job production is false. The evidence is simply not there to support assertions that high taxes alone hurt the economy or that cutting them will have the stimulus effect asserted.
Friday, October 28, 2011
Saturday, October 22, 2011
August 13, 2011 seems so distant now. Barely nine weeks ago Bachmann surprised many by winning the Ames straw poll. She was on top of the world, leading the GOP pack as the darling of the Tea Party. But then came the collapse. Rick Perry entered the race eating at her conservative base. Bachmann was unable to move to the center given her rhetoric and positions, and she disavowed any intention to do so. Media attention and scrutiny mounted, missteps and statements about HPV and retardation damaged her, and the cycle of decline began.
But now she is losing even in Iowa. Evidence is seen in the polls and in other candidates now returning to it to campaign with the belief they can win the state. She is falling back in the pack. She increasingly looks more like Rick Santorium than a leader in Iowa. She gives speeches to a few faithful but continues to slip in the polls. She has little new to say and the buzz she once had is gone. She has been unable to take advantage of Perry’s drop and instead Cain has benefitted. While potentially she can recover to win Iowa, the new January 3 date gives her less time to do that. Thus, an earlier Iowa date gives Bachmann too little time to recover and her dismal fund raising and failure to plan beyond Iowa make it unlikely she can go much further beyond Iowa.
Does Bachmann return to run for her congressional seat again? Maybe, she has until June to decide. But redistricting uncertainty and the prospects of a less friendly set of lines for the sixth district pose challenges. Moreover, the worse her presidential campaign looks the more it makes her potentially vulnerable to a primary challenge. Bachmann has never attracted big donors and if she were to run for Congress again her small donors may be tapped out or unwilling to give. She is in a bad situation right now and her options are ticking away along with the clock to Iowa.
Tuesday, October 18, 2011
Sunday, October 16, 2011
Money is what it is all about in campaigns, especially presidential politics, as they have evolved into hundreds-of-million dollar businesses, replete with fundraisers, media consultants, travel consultants, pollsters, and a host of other specialists. The days of candidate door-knocking and Lincoln-Douglas debates are part of a quaint Norman Rockwell past. Modern presidential campaigns are won or lost with money.