Biden's Abysmal Debate: Denial ain't just a river in Egypt

                    

As much as partisan Democrats seek to put lipstick on a pig, Biden's first and probably last
presidential debate was a disaster, if not fatal. Not only did it fail to do what it was supposed to do but it also confirmed public perceptions about Biden and trendlines in the presidential race that had largely been frozen for nearly six months.

            Even before this debate there were growing concerns about Joe Biden's age and cognitive capacities.  Four years ago the public was concerned about Biden's age and that has only grown since he was president.  Biden has held the fewest number of press conferences since Ronald Reagan was president, and his public appearances have mostly been canned and scripted. For many, he looks like their aging grandfather who has good and bad days, with many wondering that while we see Biden on his good days, what is he like on those days which are not so good?

            Polls indicate a majority of Americans are concerned about his age and think he shouldn't run for reelection.

            Even beyond the age factor, political science models all suggest that Biden was going to lose the 2024 election. While the models are not perfect, they look to presidential approval rating and perceptions about the economy as key to predicting reelection.

            Biden has approval numbers worse than Trump did in 2020. In fact, no incumbent president has ever won reelection with the numbers that Biden has.  In many cases, the economy looks good yet the public remains very fraught and fearful about inflation and the future of the economy.

            Even if we did not look at a traditional political science prediction model, polls indicate that for at least the last six months, Joe Biden and Donald Trump have been frozen in terms of what the numbers say in the five or six swing states that are going to decide the election. Last October I looked at Arizona, Georgia, Michigan, Pennsylvania and Wisconsin. Five swing states that will decide the 2024 election. Joe Biden was behind in enough of those swing states that were the election held back then he would lose to Donald Trump in the Electoral College. A couple of months later, the New York Times did a similar analysis, but added Nevada to the list. It too found that Joe Biden would lose to Donald Trump and the Electoral College.

            Leading up to this debate, the polls indicated in those critical swing states that Biden and Trump are close, but Trump enjoyed a consistent if not narrow lead. Generally this election as I've argued will come down to about 150,000 to 200,000 swing voters in five or six swing states. We are looking at an incredibly small number of people who effectively will decide the election.  Biden needed to move these voters.  They are probably low-information voters not paying a lot of daily attention to politics, but might nonetheless be affected by mass, pop culture or otherwise impressions of the candidates.

            Biden and his staff too were looking at the polls in the swing states.  They needed to do something to shake up the dynamics of the race.

            Thus an early debate.  Thus far, neither abortion politics as it did in 2022, nor fears of Donald Trump being reelected seem to be enough to change the trajectory of the Biden campaign. He and his staff placed a lot on the value of this first debate.

            The debate did little to move the trendline. There is no indication thus far that it altered people's perceptions of Trump versus Biden in a significant way or at least in a way to Biden's advantage. But what it did do was to confirm what many people believed about Biden and that he lacked the wherewithal to serve out a second term as President of the United States.

            After the debate party loyalists did their best to address Biden's bad performance.

            They said that it was just one bad day and he will be able to recover from it. In doing that, they drew parallels back to 2012 where Barack Obama had a bad debate against Mitt Romney but managed to recover. But that analogy is not appropriate. No one questioned Obama's cognitive capacities in 2012. There was not a belief that he was too old or too feeble to be president. He had a bad debate.

            Biden's bad performance confirmed what most people are believing. The debate might have been a bad day, even if Biden had a good day afterwards it does not alter the  impression that he is an eighty-one-year old in cognitive decline.

            It is nearly impossible to shake those types of public impressions for those few undecided voters who are out there if they were paying attention. There's an old adage you don't have a second chance to make a first impression. This first impression for them might well have been decisive.

            Party loyalists are also trying to argue that they would rather have a president with a sore throat and who stammers a little ahead of a president who lies. It may be true that the debate was between a person who lied about the facts and one who forgot the facts. But it still doesn't change the fact that there is no indication that this debate changed perceptions about Biden or changed the trajectory of the race. Does this mean that people, especially those 150,000 to 200,000, are more likely to vote for Trump? Perhaps not. It certainly doesn't mean they're more likely to vote for Biden. They could very well stay home on election day. They could vote for an alternative third party candidate. But certainly Biden did nothing to win them over.

            The reaction to the debate shifts to the question of decision making. All indications are for the last several months there were concerns among some in the Biden campaign regarding his mental capacities. But nonetheless the Biden campaign and partisans are rallying around him.  Party loyalty and loyalty to Biden seems stronger than the resolve for the Democrats to win the election. They fear an open convention more than they appear to fear losing. They fear being politically ostracized within the party. Much like Congressman Dean Phillips was when he said Biden shouldn't run.

            Somehow, Democrats are thinking he can still win this one.

            Perhaps they hope abortion fear of Donald Trump or some other black swan will intervene and change the trajectory of the election, perhaps even a second debate.  While I think a second debate is unlikely because Donald Trump has no incentive to do it. The risks of a repeat of this are too great for even Biden to consider. Yet he probably will do it or insist on it.

            There is something wrong with this level of insularity in decision making. If a candidate who was so unpopular and now so demonstrates lack of cognitive capacity even only occasionally still is nominated, there is something wrong in how political decisions are being made.  Yet despite all this, unless a black swan emerges, the theme of the Biden campaign might as well be “Denial ain’t just a river in Egypt.

The Expendables: Donald Trump versus the US Congress

Donald Trump is increasingly expendable to the Republicans in Congress.  Assuming the tax plan is

signed into law, Trump will be increasingly expendable and a liability to Congress as they head into the 2018 midterm elections and beyond.  Simply put: With the passage of the tax and the increased problems the Mueller investigation will pose to Trump and the Republicans, the latter will have less and less need for the former while finding him more and more an electoral problem.

Few if any see the connection between the tax overhaul and the fate of Donald Trump with the GOP Congress.  Yet if there is anything the Republican Congress wanted more than anything else was the tax cuts and overhaul.  Since Reagan the issue that has defined the party has been tax cuts.  It is the answer to everything.  If the economy is doing badly cut taxes. If the economy is doing well and the government is taking in too much money, cut taxes.  If we need to produce more jobs, cut taxes.  If there is tax cheating by businesses hoarding money in off-shore accounts, cut taxes.  Cutting taxes is like the classic cure-all nostrums sold by traveling salesmen in the 19th century.  One  bottle will cure anything that ails you.

Preaching tax cuts for all social ills is what the Elmer Gantrys of the GOP have preached for years.
Yes a few Republicans talked once of fiscal restraint and worried about deficits.  Yet those old Concord Coalition folks are gone.  So many seem shocked–shocked as Captain Renault was in Casablanca–that the likes of Susan Collins and John McCain would support this tax cut bill even though its regressive nature and impact will be to hurt the very people Trump and Republicans say they want to help.  Neither Collins not McCain were progressives; they are Republicans defined by  tax cuts über alles.  With this tax plan the Republicans get so much of what they have wanted for the last quarter century.

Depending on the version that finally passes, the Obama health mandate is gone, the estate tax is effectively gone, corporations pay less taxes and the rich pay less taxes.  In addition, the doubling of the standard deduction will help some but hurt non-profits, the poor will not be able to take advantage of the child care tax credit, the loss of medical deductions will do more to push many into debt, and the loss of the deductions for state and local taxes will penalize Democratic high tax and social welfare states such as Minnesota.  One should not infer that the GOP plan is intentionally cruel but its regressive nature to help the rich will have this impact.  Further, since there was concern that the tax cuts will not live up to the mythical trickle down magic, there are requirements to make further cuts to balance the budget in the future–this will pressure cuts in Social Security, Medicare, and Medicaid.  All of this is reminiscent of what David Stockman talked about in terms of the logic of the Reagan tax cuts back in the 80s–blown up the budget with large deficits into to pressure cuts to the welfare state.

Assuming the GOP gets all of this, they have gotten most of their agenda and what they want from Trump.  Of course this is a big if.  The outcome of an Alabama Senate election, the fate of Al Franken, and the ability of the House and Senate to reach agreement with one another and Trump  might still wreck all this.  But assume not...what value is there in keeping Trump around?  His agenda is largely over with the tax plan.  There will be no wall, there will be no major infrastructure  package, and abandoning NAFTA and the other trade agreements are either superfluous, icing on the cake, or something the Republicans do not really care about.  For most Republicans, the Trump presidency largely ends with his signature on the tax plan.

It will not be too much to assume that with Michael Flynn cooperating with Mueller, Jared  Kushner, Donald Trump, Jr., or Jeff Sessions might not be next.  How they too might implicate the president if at all is only a question of time.  But if polls suggest that Trump is already a problem for the GOP into 2018, he will become more so next year as more indictments and trials mount.  One can also speculate on whether the swirling sexual harassment controversies will finally ensnare the president next year.  If all that happens, the Congressional Republicans might be better off without him than with.

No this does not mean he will be impeached by Republicans.  This is still a Democratic Party fantasy.  Nor should the Democrats count on an unpopular president guaranteeing their path back to power.  Yet if Trump has already succeeded in getting the congressional Republicans most of what they want, the president will become expendable to them in 2018 and beyond.

Trump, Brexit, and the Failure of Mainstream Politics and Economics

The Brexit vote and the rise of Donald Trump have stunned the world.  Neither should.  They

are both the product of the failures of mainstream politics and economics, especially the overselling of both in terms of how they would benefit the world and more specifically, the middle and working class in the UK, the US, and perhaps around the world.
The roots of the Brexit and Trump begin in what some call the Neo-liberal restructuring of the world that begin in the late 70s and 80s with the rise of Thatcher and Reagan.  Faced with severe economic slowdowns in the UK and the US, the criticism was that the economically liberal policies of the welfare state had created high inflation and unemployment–stagflation.  The solution was to cut taxes, economic regulation, and weaken labor unions.  The theory–part of the supply side economics mantra–was that we needed to free up corporations to invest, to give them more flexibility to innovate, and to remove barriers to invest.
The Conservatives in the UK under Thatcher and then  Major and the US under Reagan and George H.W. Bush cut taxes, government regulations, waged war on the unions, and embraced international policies that took Neo-liberalism globally.  The result was GATT, NAFTA, the WTO, and other international free trade agreements that opened up the borders to capital and to some extent, labor mobility.  Yet Labor under Tony Blair and the Democrats under Bill Clinton similarly  embraced such policies, as did Cameron, George Bush, and even Obama.  All of them accepted as legitimate globalization as we know it, along with policies that embraced tax cuts and deregulation.
Even Obama–whom many Americans think as so liberal–really fell into this trap.  Upon taking office in 2009 he continued the economic policies of his predecessor that bailed out the banks but not the home owners after the 2008 economic crash, he endorsed TPP as a trade agreement, and otherwise  at best only made marginal changes in the Neo-liberal economic agenda.  Even the Affordable Care Act and Dodd-Frank were no more than market-orientated approaches to addressing social-economic problems.  Yes, the Republicans in the US obstructed Obama, but he never did really oppose even in his first two years in office with large Democratic majorities the core trajectory of Neo-liberalism.
This Neo-liberalism was politically solid by politicians and the major parties in Europe and the US as economically a win-win for all.  It was described as producing the greatest economic good for all.  Mainstream economists–sitting from the luxury of their tenured chairs or luxurious offices a top Wall Street, described free trade, globalization, and economic restructuring as economically efficient–both in a Kaldor-Hicks way (the greatest good for the great number) and Pareto (producing the winners without any or significant losers).  The few jobs lost in manufacturing would more than be made of by the benefits of free trade.  Together, orthodox economics and the mainstream parties sold the world, or at least voters in the US and UK, a story of economic prosperity.
Yet it never happened.  Somewhere along the line the economic benefits did not trickle down.  Wages have stagnated over the last 40 years, the gap between the rich and poor exploded, and the loss of manufacturing and other jobs has totaled in the tens of millions. The working class has disproportionally taken the hit, with the costs of Neo-liberalism falling on them while few of the benefits reaching them.
Now combine that with another political failure–the Bush War on Terrorism, He and Blair  launched politically disruptive wars in Afghanistan and Iraq that have destabilized the Middle East, creating the forces that have nurtured ISIS and the crisis in Syria that has now thrown millions of refugees across Europe. In the US, NAFTA helped destabilize the Mexican economy, creating the impetus for immigrants there to flee to the US for jobs.
The result is economic insecurity for many white working class, major parties largely blind to their fate, and a ready scapegoat of immigrants to blame.  Enter Brexit and Trump.
The Brexit vote is a statement that the status quo is not working.  The vote in the UK to exit was mostly in working class England.  In the US, the core of the Trump support was originally among white working class without college educations.  The same who supported Brexit, those who have lost out in the last generation or two  who perceive it is the immigrants who are taking their jobs.    The British Independence Party, Donald Trump, and others such as LaPen in France are appealing to economic insecurities, fear of immigrants, nationalism, and simply racism and religion.  And their appeals are effective.  Brexit gives credence to claims that trump has tapped into a phenomena that might put him in the White House.  Hillary Clinton, while enjoying many political advantages, seems largely clueless to the Neo-liberal paradigm of which she is a part.
Yes, all of this is disgusting, but given the failures of mainstream politics and economics to address or recognize the world it has created, the reaction here should not be a surprise.

Defining Obama: Presidential Image and Narrative in the 2012 Elections

In so many ways it may already be too late for President Obama. It may be too late for him to construct an alternative narrative about his successes and accomplishments that he can use on the campaign trail to support his re-election. For many Americans, the narratives have already stuck that his presidency and policies are a failure.

Two rules that every successful presidential candidate remembers are that “politics is like selling beer” and that “define or be defined.” The first rule refers to the power of political narratives, the second to the constructing your own image–creating an image–or having someone else do it for you. Both of these are rules about constructively using the media–generally in an aggressive and proactive way to do messaging.

This blog has repeatedly discussed the power of political narratives. Candidates need a compelling narrative that describes who they are, their vision for the future, and what they want their presidency to look like. The narrative is their reason for running for office (“I am running for president because...”) and the direction they want to take their presidency and the American public. George W. Bush was chided for lacking that “vision thing” and rightly so, but he still won in 1988 for other reasons (see below).

The way of persuasion is about having a narrative. We tell stories about ourselves when job hunting (the cover letter and resume), we tell stories to do fund raising (“Send money to feed the homeless”), and businesses sell products by telling stories (“Drink this soda and you too will be cool.”). It is less reason and facts that move people than it is narratives, with the best being about the future, messages that are optimistic, and those which inspire passion.

The great narratives of our time were Ronald Reagan’s “It’s morning in America” and Bill Clinton’s appropriation of Fleetwood Mack’s Don’t Stop Thinking About Tomorrow. Both were brilliant narratives about hope and the future. They were narratives that promised a better tomorrow; they appealed to America’s sense of progress, optimism, and that the future will be better than the past. Perhaps one of the most famous lines in movie history–Scarlet O’Hara’s “Tomorrow is another day” from Gone with the Wind captures the compelling nature of this American belief in a better future.

The 2008 presidential race witnessed dueling narratives of John McCain and Barack Obama. McCain’s narrative spoke of the world being a dangerous place and that we should not trust enemies. He touted his military experience to keep us safe and he sought to get America to forget that he was a Republican wanting to the keep the White House in his party’s hands after a failed eight years under George Bush. McCain’s narrative sought to channel the Reagan brand one more time but it failed. It failed to an Obama narrative of change. A narrative of hope for the future, of an appeal to a new generation wanting their turn at power. Obama simply had a great narrative. He also had the fortune of a collapsing economy that worked to his favor, and a Republican vice-presidential candidate in Sarah Palin who few thought was qualified to be president in the event of McCain’s death.

But beyond the narrative, Obama also understood the power of define or be defined. In politics, you need to define who you and your opponents are before they do that to you. Remember the famous 1990 Andre Agassi Canon commercial–“Image is Everything”–that captures the point.

Image construction is important to politics, especially if you can do it to your opponents. On Labor Day 1988 Michael Dukakis had a 18 point lead over George Bush. Bush used Willie Horton, references to the ACLU, and stories about the Massachusetts’ governor not wanting to kill someone who hypothetically raped his wife to cast him as a pinko who was soft on crime. Bush went to win the presidency by three points.

In 1992, when allegations of marital infidelity nearly wrecked Bill Clinton’s campaign, his staff used the latest technology of the day–the fax machine–to proactively counter stories. Finally, in 2004, the Bush campaign brilliantly defined John Kerry as an elitist coward who purposively injured himself three times to get out of Vietnam early. The genius in transforming a three-time Purple Heart winner into a coward was amazing; thus the power of narratives.

Again in 2008 Obama understood the charm of definition. He defined himself as the candidate of hope and change, of McCain the candidate of the old an stodgy, and he also successfully declared Ronald Reagan and his narrative to be dead. Obama brought narrative and definition together to create an amazing campaign story about himself and his opponents.

But the brilliance of 2008 rapidly faded. All that was done so well in 2008 failed Obama and the Democrats in 2010. They lost the narrative and definition. Palin mocked Obama by asking how we liked the “hopey-changey stuff?” The Republicans tied TARP to Obama and not Bush. They decried that the stimulus bill was a failure (even though it did work but was insufficient to address the real depth of recession the economy was in), and they questioned his competence and leadership. All of this has stuck. In part it stuck because there was some truth to many of the accusations, but still the Republicans were lethal after being trounced in 2008. They went on the attack from January 20, 2009 and redefined Obama as a failure.

Now think about where Obama is as 2012 is about to begin. Obama’s successes are defined as failures. The stimulus did help, TARP made money (Yes, it was a Bush program), and he did deliver on many other promises. Health care reform is decried as Obamacare and bank regulation as killing the economy. Obama’s narrative of change has degenerated into “It could have been worse” as described so many times in this blog. Obama still lacks a narrative and worse, he is defined as a failure and as unable to rescue the economy. Again, there is much evidence that this is accurate, but even if not, Obama has been defined by a narrative that he cannot escape. Obama needs to escape the economy and run against a do-nothing unpopular Congress. He needs to cast himself as an economist populist that fights for the other 99%. In short, Obama needs a complete makeover.

It will be hard to do this now that he has already been defined by the Republicans for the last four years. But even if not for the last four years, clearly in the last few months the Republican presidential debates have been influential in doing that. While Obama does his presidential thing, the GOP candidates debate and get press. They get air time attacking the president and he does not respond. The candidates collectively have succeeded in crafting an image of Obama that has stuck. While four years ago content analysis of media coverage of Obama demonstrated overwhelming positive images, were a similar study done today the hypotheses today would be of just the opposite–overwhelming images. Obama has been defined–his narrative for him written by his opponents.

Obama at least has one advantage–the image and narrative for his Republican opponents is being written and it is a negative one. Palin never had a chance to run for the presidency with over 60% of the public thinking her too dumb or unqualified to be president. Now think about the other Republican contenders–Romney as a boring multiple choice Mick–Bachmann as a religious zealot–Perry as a lightweight cowboy–Cain as a lightweight sexual predator–and Gingrich as a cranky, adulterer, arrogant, hypocrite. These are largely self-defined images reenforced by the media. Hardly the images that are winning presidential formulae.

As the Iowa caucuses loom it will be telling to see how Obama tries to remake his image and narrative. Again, it may be too late to do that but with the narratives and images of his opponents equally dismal Obama might be able to pull off a second term with a slogan reminiscent of we chanted when Richard Nixon was running for a second term: “Don’t change dicks in the middle of a screw, vote for Nixon in 72.” Better the devil we know than the one we do not. That may be Obama’s best hope for a narrative.

Bonus quiz and word association time: When I mention Obama or any of his GOP rivals, what words or images come to your mind? Let me know your suggestions.

The Clock Ticks: History, Unemployment, and Presidential Elections

Less than one year to the 2012 elections. Less than 60 days to the New Hampshire primary. Barely 50 days to the Iowa caucuses. The official presidential race is upon us. But as the clock ticks, time is running out for Obama and history is against him.

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%.

Key to a presidential re-election is the actual unemployment rate. But economic, and the reality or perception that it is moving in the right direction, is also important. If there are not significant declines in unemployment along with economic growth and a perception that the economy is moving in the right direction, presidents are not given a second term.

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.

Class Warfare and the American Dream

Note: This piece appeared in Politics in Minnesota, Capitol Report, September 29, 2011.

America is the land of dreams. The United States is lauded as the land of opportunity, the place where anyone can go from humble beginnings and become a millionaire. It is the tale of rags to riches, of the Horatio Alger story, of a nation where we can rise as far as our talent takes us. Yet dreams die hard. The reality is that America is a nation of increasing poverty, economic inequality, and decreased social mobility; at least according to a series of recent studies and reports documenting the economic woes of the United States.

The first study is from the United States Census Bureau in 2010 describing poverty and income in America. In 2010 the richest five percent of the population accounted for 21% of the income, with the top 20% receiving over 50% of the total income in the country. This compares to the bottom quintile accounting for about 3% of the total income.

A second study by the Center on Budget and Policy Priorities in 2010, drawing upon Congressional Budget Office research, found that income gap between the top one-percent of the population and everyone else more than tripled since 1973. After-tax income for the top one-percent increased by 281% between 1973 and 2007, while for middle class or middle quintile it increased by 25%, for the bottom quintile it was merely 16%. Looking beyond income to wealth, the maldistribution has not been this bad since the 1920s. According to the Institute for Policy Studies, in 2007 the top one-percent controls almost 34% of the wealth in the country, with half of the population possessing less than 3%. The racial disparities for wealth mirror those of income. Since 2007 the wealth gap has increased as the value of American homes–the single largest source of wealth for most Americans– has eroded. Studies such as the Survey of Consumer Finances by the Federal Reserve Board have similarly concluded that the wealth gap has increased since the 1980s.

But Americans dream and believe they can rise to the top–get lucky, be the Horatio Alger rags to riches story; thus our fascination with buying lottery tickets. Yet social mobility in America has ground to a halt. A 2010 Organization for Economic Cooperation and Development study found that social mobility in the United States ranked far below that of many other developed countries. Nearly half of the economic advantage parents have in the United States is transmitted to their children; a number nearly two-and-one-half times that of Australia and Canada. The biggest cause of social immobility according to the report is declining educational opportunities for many students. Other studies, including those in 2005 and 2010 in the Economist similarly point to declining social mobility in the United States that makes it difficult for individuals to rise from one social economic status to a better one. In fact, there is better than a 95% chance that children will not improve their social economic status in comparison to their parents. Few really can move on up.

Conversely poverty in America has increased. In FDR’s second inaugural speech in 1936 he spoke of a nation that was one-third ill-clothed, ill-housed, ill-fed. In the 1950s due in part to the New Deal anti-poverty programs, the poverty rate fell to 22%, with over 39 million poor persons living at or below poverty level. By 1969 Great Society programs reduced the poverty rate to 12.1%, with a further decline to in 1973 where the poverty rate was 11.1%, representing 23 million.

Yet after that, and especially beginning with the Reagan era’s retrenchment on social welfare programs, the poverty rate has continued to climb. In 1983, the poverty rate was 15.2%, in 1992, the rate was 14.5%, representing 36.8 million, and in 2003, 12.5%, representing 35.9 million. Moreover, in 1992, the poverty rate for female-headed families with children was 48.3%, and 21.9% under the age of 18 were in poverty (14.6 million children). In 2009, 14.3%, or nearly 40 million in poverty, and now the latest Census figures point to a poverty rate in 2010 of 15.1%, representing a record 46 million in poverty. The numbers are equally grim when one looks at women, children, and people of color in poverty–all record or near record numbers.

One could recount in even more detail the picture of an America with growing class differences that are fixed. We live in a world where there are clear rich and poor, with the income and wealth differences played out in terms of racial and gender disparities. We live in a nation where the privileged few go to better schools, live in safer neighborhoods, have better access to medical care, and therefore are healthier and live longer. As F. Scott Fitzgerald once stated in his play The Rich Boy: "Let me tell you about the very rich. They are different from you and me.” Yes they are–they are privileged.

Many reasons explain the growing gap between the rich and poor and America. But at the core one can point to the emasculation of the New Deal and Great Society programs that once provided income transfers to the poor. There is the dramatic cuts on effective tax rates in America that prior to the 1980s were 70% but now are less than half that such that the poor and middle class, as Warren Buffet pointed out, pay a greater percentage of their income in taxes than he does. Similar tax cuts have been gifted to corporations. As a result, the rich are asked o contribute less to society and economic inequalities that exist are not offset by tax policies and income transfers.

Moreover the war on organized labor has had its toll. Unions from the 1930s until the 1980s had a significant impact on increasing wages, benefits, and the quality of life for America. But first beginning with Reagan’s firing of the PATCO air controllers in 1981 and continuing to Wisconsin governor Scott Walker’s assault on public employees this year, unions have come to be depicted as the new welfare queens in America, blamed for declining American competitiveness and budget deficits. Never mind that successful nations such as Germany pay higher wages and benefits, many believe that the only way to future prosperity in this country lies with immiserizating the American worker.

A couple of weeks ago Republicans lambasted President Obama’s call for tax increases on the wealthy as class warfare. The Republicans deserve credit–at least they recognize that there are class differences in America and that a war exists. However, only one class is fighting–the corporate rich–while the rest society sits idly by immobilized.

Nails in the GOP Coffin: Thoughts on the Iowa Straw Poll Results

Bachmann wins, Pawlenty is out. What do learn from the Iowa straw poll? Whatever political moderation existed in the Republican Party, it rapidly disappearing as the GOP is being remade in the image of Palin and Bachmann.

Bachmann

The headline clearly is that Bachmann received nearly 29% of the vote. No surprise there. Bachmann has narrative that clearly appeals to a demographic of social conservatives and Tea Party members. For months I argued that mobilizing this vocal and active segment of the part would make Bachmann a major force in Iowa. With a divided field she had captured a large bloc of voters and she used this appeal along with her Iowa connection and strategy to do well in that state. Her challenges of course will now be to move beyond Iowa, reach out to others beyond her base in the party across the country. Moreover, as the field of GOP contenders winnows (Pawlenty exists) and expands, will she pick up supporters or lose them? Bachmann is definitely the headline of the party but challenges persist.

The GOP

Look beyond Bachmann. She received 28.6% of the vote, Paul 27.7%–together they accounted for 56% of the straw poll. These are two candidates who represent perhaps the most extreme agendas among the GOP field. Add to them Santorum who polled at 9.8% and one finds that nearly two-thirds of the straw poll went to what would appear to be non-mainstream candidates. Pawlenty, perhaps the most mainstream and establishment candidate who participated in the field, polled barely 14%. This is a party that has moved dramatically to the right of the one that picked Romney as the Iowa straw poll winner and McCain as their nominee in 08. The GOP had redefined itself. It is–as I have argued for months–no longer the party of Ronald Reagan. Sarah Palin successfully remade the party into one captured more firmly by the Tea party and owing much of its ideological allegiance to a blend of Barry Goldwater, Pat Robertson, and Ayn Rand. Paul and Bachmann represent different wings of this new party, but Bachmann is better poised to run within this new party because her rhetoric and narrative are less pedantic and more appealing that Paul’s cerebral musings about the gold standard.

Romney

Romney is in trouble. In theory the frontrunner, but he is the frontrunner in a GOP party that no longer exists. He is part of the old Reagan Republican Party (along with Pawlenty) now fading. As the Party has shifted look to see it be more difficult for him to maintain his lead. Bachmann represents the new center of the new Republican Party. She and Paul may not be the fringe, Romney and Pawlenty are.

Pawlenty

No surprise he is dropping out. He never had a chance. He never had a narrative and he was a Reagan Republican running in a Palin Party. He tried to fake being more conservative than he was, coming off as inauthentic and phony. He made Iowa make or break and he broke. Bachmann helped seal the deal and yet again unended her Minnesota rival. But Pawlenty was doomed even without her–he just lacked appeal as a candidate and he never created a rationale for he presidency. It also does not help to have a non-existent legacy as governor besides bankrupting it.

Perry

Perry changes the equation for Bachmann. They will fight out for many of the same supporters and the challenge will be to see what happens. Perry is Bachmann but with executive experience. But Perry’s support demonstrates again how far to the right the GOP has moved.

But what does it all mean?

Commentators state the challenge is for Bachmann to capture swing or centrist voters within the party. She may not need to do this. First, her bloc approach may be enough to help her for a long time. Second, the moderate GOP voters may be leaving, going the route of while males who abandoned the Democratic Party in the 1970s and 80s. If the Reagan Revolution redefined the GOP and Democratic Party membership, then the Palin-Bachmann redefinition will do the same. Some will leave the Party, perhaps leaving it a much more conservative one that even before. Within a party of vanishing moderates, Bachmann can win.

Acta Est Fabula: Pawlenty’s Presidential Crawl Officially Begins

On Monday Tim Pawlenty made it official–he is running for president. No surprise here. He has been preparing to do this for the last two years more or less. Yet how do his prospects look? Perhaps the best thing going for him is that the GOP field is weak and he has an opening. His momentum, if any, is as a result of a void in Republican support for a presidential candidate.

Pawlenty’s presidential announcement was poor. First think of the visuals. Television is visual and you want to avoid talking heads. Pawlenty chose the Iowa state capitol as a backdrop but when I viewed it all that was visible behind him were trees and grass. No capitol, no flags, no people. It looked like he was standing in the park, speaking to a small group, running for dog catcher. It did not look presidential, it looked more amateurish. There was no interesting visuals or spark to light up the talk. Contrast to Obama or a Bachmann–there would have been crowds around them on camera cheering. Here, the applause sounded like Tiger Woods sinking a shot for par 3.


Now the message and delivery. Pawlenty has been a candidate in search of a narrative or message ever since he commenced his presidential bid. He has sought to define himself as the ”Sam’s Club Republican,” as the tax cutter, and as a social conservative.

He now appears to want to be a prophet, telling the American public the truth. Pawlenty uttered “truth” 16 times, aiming to the be straight-talking Harry Truman of his generation, telling folks not what they want to hear but what they need to hear. At the same time he also sought to copy a well-trod path of running against Washington, D.C., using Obama “change” mantra from 08 which also worked successfully for the GOP in 10. “Truth” for Pawlenty” in 12 is his version of “Change.”

Yet the narrative will not work. Obama’s narrative was positive, forward, and self-defining. Pawlenty’s is not. It was dark and depressing. Pawlenty needed a speech that defined who he was and what America would look like under his presidency. The message was dark and pessimistic–one of cuts and sacrifice. It reminded me of Walter Mondale in 1984 saying he was going to tell the truth when running against Reagan. It did not work. It was also dark like Jimmy Carter’s July 15, 1979, “Crisis of American Character” speech, even if true, it was not inspiring.

Pawlenty lacks a rationale for why he wants to run for president, as evidenced by his Time magazine interview when asked why he wants the office he stated: "I don't know. I wish I had a good answer for you on that." Pawlenty lacks an elevator speech for his presidency, he lacks a clear narrative for running, and he lacks a definition for his campaign. That came out in his Des Moines declaration. He needed an announcement with fireworks but it did not occur. He should have began his declaration with his vision and self-definition and then moved on to the case against Obama. Yet he failed to do that, leading instead with a dark message and bland delivery that failed to give his campaign a jump start.

Finally, poor Pawlenty. Tornadoes obscured his message. What next? Bachmann again upstaging him?

Pawlenty’s big hope is that no other GOP takes fire and he slips in by default.

Right now, Pawlenty may get 7-10% in Iowa, limp through New Hampshire, and then die in South Carolina.

Debating Government: The Competing Values of Public Service and Market Activity

JFK, Space-Aliens, and Government
I am not a big believer in conspiracies. It was a single shooter in Dallas in 1963 and there is no massive government cover-up over space aliens and area 51 in New Mexico. Yet the events unfolding in Wisconsin over efforts to strip public employees of their bargaining rights and the ugly Prosser/Kloppenburg Supreme Court race, the potential government shutdown in DC, and the coming train wreck over the budget in Minnesota are all connected. The common thread in all these events is a simple question and debate: “Why Government?”

Why Government?
More specifically, the question is over the value of government in terms of what it uniquely does or performs. It is a core debate over whether the free market and logic and values are sufficient for ordering American society, distributing wealth and income, and delivering the good life, or whether the government itself is necessary or needed to accomplish this task. The core debate then is over whether there are unique values and contribution that government and its workers offer, thereby distinguishing them from the free market.

This is a question that has dominated my teaching in classes on ethics, public policy, and economic development policy for at least a decade. It is also a question that has become the focus of many talks I give to community and governmental groups. The latter especially are asking me to address it as they feel increasingly assaulted and demonized.

Americans have never really liked government. It started perhaps with our animosity to George III when we dumped tea in Boston Harbor. American ambivalence can be seen in attitudes over government programs such as welfare and Social Security (we hate one, like the other), and views on government regulation (we like the FDA to regulate drugs to be sure they are safe but dislike this regulation when it slows down what we hope are new cures for cancer). Even the TEA party is torn over government–they want less taxes and less government and plea for a more libertarian society, yet they demand that the government keep their hands off of their Medicare and Social Security.

But the most recent disdain toward government was launched by Ronald Reagan in 1981 when he declared government the problem, not the solution, and also stated that one of the most feared statements one can hear is “I'm from the government and I'm here to help.” Statements such as this demonized government, and it is not hard to connect this spirit to current attacks on school teachers and public employees by NJ and WI Governors Christie and Walker.

Not Necessarily a Partisan Issue
At the crudest level the debate over the unique value of government is a Republican/Democrat one, with the former described as anti-government and the latter pro. This is not a fair characterization. Many GOP like some aspects of government–the military and the police, and many Democrats dislike parts of government–regulation of reproductive and marital rights. But even more deeply, under president Clinton and VP Gore, embraced ideas from Reinventing Government by Gaebler and Osborne to re-engineer the public sector. The latter argued for the introduction of many private sector ideas and the spirit of entrepreneurship into the government in order to revitalize it. They wanted to make government, as Ross Perot said: “Run more like a business.”

Thus we saw statements that government should treat citizens more like customers, that it should be more market savvy, and that it should do more privatization and encourage competition to save money and improve performance. Why all this discussion is charming, what it failed to do was two things: 1) It misunderstood something the constitutional framers saw; and 2) it failed to capture a unique conception or role for government.


Markets versus Government
The American Constitutional framers feared powerful government. Efficient governments are a threat to individual liberty. Their goal in designing a complex government with checks and balances, separation of powers, bicameralism, and staggered electoral terms was to slow down the process of political change. It was to prevent an impulsive tyranny of the majority from infringing the rights of the minority. Better to create an inefficient government than an efficient one that makes the trains run on time at the expense of individual rights. Thus, a constitutional government such as ours was never meant to be efficient in the sense of competing with the private sector.

Efficiency is only one of the values of government, but there are others. This is the second mistake now being made. Governments are not just supposed to be efficient, they are also supposed to be fair, care about equity and equality, and respect other values such as transparency and respect for individual rights. Gaebler and Osborne failed to appreciate this, and so do many in both parties as they argue over the value of government.

Thus, on one level, listen to economists and they will tell you that the rationale for government is to address the problem of market failure. Government must act when the market either cannot or is not able to solve problems. Classically these are problems involving public goods such as national defense or security, or externalities such as pollution. These are issues where there is no market incentive to solve the problems.

The Value of Government
Yet this economic justification of government is thin. There is a broader value for government based on democracy and the public interest. As I discussed with my students the other day, many local governments in MN have recreation centers, parks, and libraries. True there may be no return on investment to them and they may not be efficient to operate, but that is not the end of the debate on whether government should provide them. Instead, it is about whether the people want these amenities. It is the peoples’ choice to offer these goodies. Moreover, the way the government makes choices and decisions are not always efficient but again, efficiency is not the final value. We do not value elections, due process, or civil liberties and rights because they are efficient, we prize them because they promote fairness and accountability.

The private sector almost singularly promotes efficiency and the bottom line. In the end, while many businesses claim “they do it all for you,” how many of you believe that is true? It is only to the extent that doing it for you is profitable or makes sense. Think about how much we all hate phone trees with businesses–it may be cheap to do this but does any customer think this is good service.

Citizens are not Customers
Contrary to what some may contend, citizens are not customers. A business-customer relationship is a cash nexus with loyalty determined along a singular dimension. A government-citizen relationship is deeper, reflecting many more complex values and connections regarding democracy, transparency, and accountability. “No taxation without representation” captures this sentiment while “No user fee without representation” misses it. The former suggests a right to a voice, the latter not necessarily. There is a big worry when some advocate that government should be more like a business. It is a logic that changes and challenges the basic values of government–suggesting government is not necessary and that it is simply a thorn in the side of the market.

Conclusion
The real debate in Wisconsin, DC, and St. Paul is one over government versus the market. It is one about the values of government and what it can contribute to the promotion of a good society. This is a debate worth having, and it is one that advocates for government need to reframe in terms of a language and set of values that describes what government uniquely can do. If they fail to do that they will lose the debate.

Attacking unions: It's not about the money, it's about power

Today's blog appeared in Minnpost as an op-ed.

By David Schultz | Wednesday, Feb. 23, 2011

Efforts to bust collective bargaining rights in Madison are not about the money. Money and budget deficits are the pretext for a larger battle to attack government and break public-sector unions for political reasons.

In many ways, this is the logical continuation of the union-busting battle that began under the Reagan era. What is really going on here is an effort by corporations and the GOP to dismantle one of the few remaining institutions in America that defy their power. It is the battle to restructure labor markets to serve a broader corporate neo-liberal agenda.

Through the early part of the 20th-century unions lacked the legal authority to engage in collective bargaining and strike. Strikes to improve wages and labor conditions were considered restraint of trade or illegal combinations that were fought both by the law and by brute force. The Pinkertons were originally a police force used to break up strikes, and the origins of municipal police departments can be traced to efforts to control unions. Debates surrounding the Sherman Anti-Trust Act often included discussion over whether unions were trusts that should be prevented.

But through the early 20th century workers continued to strike and organize. They organized to earn better wages for their families. They organized to improve deadly labor conditions in mines, mills, and factories. Finally, the Wagner Act — aka the National Labor Relations Act (NLRA) — in 1935 recognized the right to collectively bargain and organize in the private sector. Subsequently, similar rights were extended to workers in the public sector.

The NLRA was a success. By the early 1950s private-sector unions constituted approximately 38 percent of the private-sector workers. Wages, income and working conditions dramatically increased, economic inequalities decreased, work place safety improved, and features such as the eight-hour/40-hour work week emerged.

'A countervailing power'
Yet the 1950s was the high point of unions. Corporations hated them. Unions represented what John Kenneth Galbraith called a "countervailing power" on corporations. Yes, in many cases unions sided with management on protectionist practices (think of the car industry) and had corruption problems (Hoffa and the Teamsters), but they also did a lot of good, by raising the American standard of living. The real problem for corporations, and for Republicans, was that unions supported Democrats. They provided dollars, organizing, and votes for Democrats.

But the Vietnam War and the dual oil embargos in the 1970s precipitated a major fiscal crisis that produced decreased corporate profits. It was at this point that corporate and Republican interests converged to attack labor unions. Restructuring domestic and global labor markets by busting unions and dismantling government regulations would free corporations to cut wages, restore profits, and shift capital across the world. The beginning and most visible effort to break unions and limit their power was the decision by President Reagan to dismantle PATCO in 1981. He busted the air traffic controllers' union and that sent a clear signal that it was OK to go after unions.

Together the GOP and corporations waged a terrific battle against unions, claiming that America's economic decline was rooted in high union wages, inflexible rules, health care and benefits, along with excessive government regulation and taxation. Big government and unions were the cause of American decline. Of course, not all of this is true.

Comparatively, there are higher rates of unionization in Europe — along with higher wages, and these countries, especially Germany, remain very competitive. Yet blame the unions because they form a great scapegoat for American industrial decline. They hide the fact that many corporations failed to invest in new facilities in America and instead bled old ones. They failed to respond to new technological advances by Japan and instead sought restrictive trade policies to prevent foreign competition. One could go on and on, but the short answer is that unions and workers were not the cause for badly designed American products and they were not the reasons for economic outsourcing to China. Increased corporate power, globalization, and the drive to maximize profits, as Bennett Harrison and Barry Bluestone wrote in "The Great U-Turn," were the cause.

Private-sector unions weakened
The war on private-sector unions and government has been a success. Private-sector unions are now relatively weak. They constitute about 8 percent of the private-sector workforce. Their decline correlates with significant increases in economic inequality, declining wealth for the poor and middle class, and the weakening of the Democratic Party. The one stronghold for unions is the public sector. They constitute a larger percentage of the public sector workforce than do unions in the private sector. They generally support Democrats, and in return for lower wages compared to the private sector they have received greater job security and often better benefits. The job security in part was a consequence to prevent the politicization of the government, to protect from political reprisals, and limit patronage and the spoils system.

Public-sector unions are now under attack as governments now face their own version of a fiscal crisis. The battle in Wisconsin is part of a broader agenda to demonize public employees and government. It is easy to fault teachers and tenure for why Johnny can't read. Instead of adequate funding for schools or better social-welfare programs to prepare poor students to go to schools, blame teachers. Say it is their fault and take away tenure, put them on pay for performance, or close schools down.

None of this solves the problem.

Similarly, blame years of regressive tax policies on public-sector unions and fault workers as the cause of structural deficits. It is just so easy. It is a great wedge issue — play the resentment and divide and conquer cards with taxpayers and private-sector workers. Somehow if only corporations, and now government, could be free to hire and fire at will, slash wages, and gut benefits, then we would not need to raise taxes and our deficits would disappear. It is such a simple solution — instead of raising the standard of living for all workers, cut public-sector unions down. Level the playing field by bringing everyone down. This is what the battle in Wisconsin is about.

Detached Reality and Altered States: The GOP Response to the Dayton Budget

"This budget is detached from the reality every other state has recognized," Minnesota House Speaker Kurt Zellers.

That's how Speaker Zellers describes Governor Dayton’s budget, especially the provision calling for new taxes on the wealthy. Similarly, Senator Amy Koch, majority leader of the Senate, calls it a “job killing budget.”

Job killing and detached from reality. This is the core argument of the GOP against the Dayton budget. Yet behind the name calling one looks in desperation for the Republican alternative and it has yet to emerge. Just last week Dayton vetoed the $1 billion in cuts the GOP had already suggested. Yet that $1 billion was more than $5 billion short of what is needed, and the GOP has yet to propose how they plan to find the additional money.

The truth is they do not have a solution. Yes they will rant and rave about tax hurting the state economy (little evidence that is true), that there is waste and fraud (little evidence that is true), and that the budget is a job killer (even less evidence that is true). However, they do not have a solution and are afraid to offer one. Why? Two reasons.

First, education, health, and public safety constitute 70%+ of the state budget. Any solution that seeks to address the deficit without cutting these items will not work. As Willie Sutton said when asked why he robs banks: “That is where the money is.” These items include K-12 and other popular programs for health. Cuts to them will be unpopular and the GOP does not want to be the party proposing them. They want to be a majority party beyond 2012 and if they get tagged as the ones who threw grandma out of the nursing home and took books away from Suzie, they are dead. They are hoping Dayton and the DFL take the lead on these cuts and then the GOP can escape blame. Moreover, the $1 billion cuts they suggested so far? Simply trial balloons on programs such as LGA to see how Dayton would react. So far, none of their proposals inflict clear pain upon voters.

The other reason they cannot swallow taxes? Their core constituency seems dead set against it. Tax opposition is the cornerstone of the GOP and the Tea party. To raise taxes is to violate a core belief no matter the reality. To raise taxes means the GOP is no different than the Democrats. To raise taxes also risks alienating many fiscal conservatives who might go elsewhere or not vote if the GOP supports taxes.

Thus the rock and hard place for the MN GOP: Be responsible, compromise, and accept some tax increases on the wealthy along with some spending cuts and risk alienating their base. Oppose tax increases and cut spending to popular programs and lose your majority in 2012. All Dayton and the DFL need to do is figure out how make this GOP dilemma work to their advantage.

Some will argue the GOP can make all these cuts without tax increases, without hurting the state, while also making additional tax cuts, and in the process grow the economy. Sound familiar? About 30 years ago Reagan said he could cut taxes, increase defense spending, and grow the economy without hurting the poor. John Anderson, in running for president against Reagan, said the only way that could be done was with “smoke and mirrors.” He was right then, and now. David Stockman confirmed that.

The basic GOP message on the economy, taxes, and the budget has been smoke and mirrors for 30 years. It has been about cost shifting, fund raiding, program bleeding, living on past spending approaches. It has been about blaming government waste, immigrants, and lazy welfare cheats as the cause of the financial problems we face. It has been about ignoring how the demand for tax cuts to benefit the wealthy have forced a hemorrhaging of the deficit at the national level. It has been about Pawlenty pushing through a law counting inflation for revenue purposes but not for the purposes of state expenditures.

It has been about simply being dishonest about the reality of the budget crisis we are facing. It is about constantly postponing to the future the problems with the present budget and spending scenario. It is about them saying that we do not have a revenue problem but a spending problem. It is about them clinging to a faulty supply theory of economics that is no more than a gloss for tax the poor and give the rich a free lunch.

Dayton’s budget reflects compromises, yet I do not see the compromise coming from the GOP. I give Dayton a lot of credit. His budget is grounded in reality. He is saying to those who got the feast it is time for them to pay for the meal. It is telling those best positioned to bear the risk and costs to assume their burden. It is telling people that we need to ask the best advantaged to stop being so greedy and recognize they have a community duty to pay their debts and help others.

Conversely, Obama and the national GOP are equally culpable in creating the Washington mess. Together they extended Bush era tax cuts that added nearly $1 trillion to the deficit and now both sides are whining that they need to make cuts. Last December Jesse Jackson got it right when he said the tax cuts then meant the poor would lose this spring. Even Pat Buchanan agreed. Obama admitted this week his budget did little to address the bigger structural problems with the budget. No one will do this until after 2012, if then. They have all created a mess they are unwilling to fix.

And then there is Bachmann. She continues to run across the country demanding fiscal accountability and cuts, yet she has no track record on delivering either. She seems more interested in worrying about whether women breast feed in public. Terrific! She has now cornered the anti-lactation vote.

I grew up in the home town of Rod Serling and the Twilight Zone. I know something about altered states. I wonder in the end, who is really living in a different reality.

Tea Party Candidates and Conventional Wisdom: Why the Democrats Got it Wrong

So Democrats are rejoicing and Republicans fretting the victory of Christine O’Donnell in Delaware.

Conventional wisdom is that the GOP worry that her victory as an extreme candidate makes it harder for the party to pick up enough seats to take back the Senate. Conventional wisdom is that the GOP is cannibalizing its moderates and pushing the party to the fringe right.

Conventional wisdom that Democrats can win since voters will repel from these extremist candidates. Conventional wisdom may be wrong.

There are two clear truths in politics–-angry people vote and messaging is important. The Democrats seem to have forgotten this and are banking on voters turning out against the Tea Party candidates. They should wish for a pony too.

First, think about the fact Rod Stewart was correct-–it is about passion and the same is true in politics. Passion or anger are the genesis for the political motivation to participate. Rarely do contented, alienated, or disaffected vote. In 2006 and 2008 the Democrats had the anger and passion and they voted. This year they do not and they may stay home.

Second, the Tea Party people have the passion and anger and they are participating. They will be there on November 2, in the same way they have been there during the primaries.

Third, in off year elections we can anticipate a national voter turnout of about 40%. In areas even less. If 90% of life is showing up, and if politics is also about mobilizing a base, the Tea Party candidates have an advantage. A small group of highly motivated (angry) voters showing up in a election with low turnout means they will have a big impact on races. Even if they are only 10% of the total turnout, that is enough to change outcomes when only 40% of electorate votes.

Third, Democrats are counting on moderate and swing voters being shocked by the extremism of the Tea Party candidates and not voting for them. Here the Democrats are presupposing these voters realize the Tea Party candidates are extreme. The Democrats need to message on this and have thus far failed to do so.

Fourth, even if they message, Democrats need an alternative. Voters, including the swings, are upset with the status quo. They want an alternative? What is the Democratic narrative? “The other side is nuts, stay with us.” Some message.

In 1980 voters had initial and significant hesitation with Reagan. Carter and the Democrats tried to cast him as a extremist nut. It failed. Angry voters upset with the status quo opted to take a chance and go with Reagan, preferring change over status quo.

So the Democrats should not count on being saved by the Tea Party take over. Democrats still need a message–-an alternative and they are running out of time. They have a McCain problem. In 2008 McCain had to run against the status quo and for change when the GOP had controlled the White House for the last eight years and Congress for six of the last eight. Now the Democrats are being forced to run against themselves.

What are they doing is dumb. Beyond hoping for a GOP meltdown, they are making a classic mistake they always make–-run to the right and ape the GOP. That will not work. Who do you vote for if you want change? The GOP or a party acting like the GOP? The real alternative for the Dems is a progressive one–-run against Wall Street, the banks, and big business. But given how much money they have taken from them, don’t look for that to occur.

What is Orthodox Republicanism?

Congresswoman Michelle Bachmann’s formation of the congressional Tea Party caucus portends the Republican Party both a challenge and a confrontation. It is a battle for the soul of the GOP, suggesting a new definition of the party in light of its 2006-8 loses. Yet this remaking of the party is only the latest effort by the Republicans to define themselves, asking what in fact is orthodox Republicanism?

If the GOP takes over the House, the Tea bloc could hold the balance of power. If the Democrats retain control, the Tea caucus might force the Republican leadership into an ever more uncompromising ideological corner. But in either case, the formation of the caucus is the maturing of the Tea Party as it travels from a grassroots movement to an institutional force within the Republican Party. The real question though is whether the Tea caucus rebrands the GOP or the later coops the former.

This is not the first time the Republican Party has sought to remake itself. Think of the GOP at its inception as the party of Lincoln, committed to emancipation, civil rights, and economic freedom. Fast forward to Harding, Hoover, and Landon, the party of small government, business, and opposition to the New Deal. Then jump again to the 1950s and 60s. At the time I grew up in New York, Eisenhower was president building the interstate highway system, signing a major civil rights bill, and denouncing the military-industrial complex, while Governor Rockefeller, Senator Javits, and Democrat Senator Bobby Kennedy battled amongst themselves for the crown of who was more liberal.

The contemporary battle for the Republican orthodoxy begins in 1964 when Barry Goldwater challenged the Rockefeller wing of the GOP for dominance. Goldwater’s “Extremism in defense of liberty” speech was a repudiation of the accommodation with the New Deal that Eisenhower, Javits, and the Rockefeller wing had reached. Goldwater may have lost the election but he propelled the GOP in a direction that first triumphed with Reagan’s victory in 1980 and his inaugural speech declaration that government is the problem, not the solution.

The Reagan coalition blended together often contradictory movements of economic liberty and social conservatism. The former requires a minimalist state protecting individual choice, the later requires an activist one second-guessing freedom. While ideological, it was still willing to compromise within its party and with Democrats, producing notable and important legislation such as the 1986 tax reform and the 1990 Americans with Disabilities Act. From 1980 to 2008 the Reagan brand is what defined the party. But beginning with the presidency of George Bush in 2001, and clearly by its end the Reagan brand had worn thin and when McCain ran and lost in 2008 it was clear that Reaganism was dead. Obama’s victory, along with Democratic gains in 06-08, signaled that change. For whatever it meant, it was preferred to Reaganism.

But the seeds of Reagan’s demise in McCain’s 2008 loss produced the heir of a new Republicanism in Sarah Palin. Palinism still seeks to balance the social conservatism and economic liberty of Reaganism, but it takes seriously the Goldwater extremism speech in its hyperactive purism and refusal to compromise. Palinism takes aim at the New Deal, combining it with nativism and constitutionalism that came to a head in the formation of the Tea Party and its mantra “I want my country back.”

The Palin makeover of the GOP combines Goldwaterism and Reaganism with a cult of personality, a multi-media advertising campaign, and a dose of Ayn Rand libertarianism. Palin, Fox news, conservative talk radio, and blogs have all produced less a coherent ideology or world view than it has yielded an attitude and brand. It is brand built on populist anger, anti-government feelings, opposition to immigration, gays, abortion, Democrats, and anything else that inspires fear. Partaking of that brand is Michelle Bachmann, and now the congressional Tea Party caucus.

While ideologically incoherent, Palinism has a deeper totalitarian aspect to it. Language describing some GOP members as RINOS (Republican in Name Only), talk of a 2009 conservative litmus test, and complaints that even Senators Bob Bennett and John McCain are not pure enough speak to a new orthodoxy.

So what is orthodox Republicanism now? It may be no more than a marketing brand or technique attempting to repackage a collection of contradictory ideas, some that have been part of the Republican Party for some time, others that are new. Palinism’s rebranding of the GOP offers little new, except for a multi-media cult of personality campaign that draws upon the anger and fear of many that their way of life is threatened and that someone else is to blame for it. If only government, gays, immigrants, abortionists, Democrats, and RINOS did not exist, we could take back our country and prosper again. This is orthodox Republicanism.

The Timidity of Reform

But will it work? This is what someone asked me last Friday after Congress sealed the deal on the financial reform package for the banks. My simple answer is that there are some nice reforms here, but much like the health care law, the economic stimulus bill, and the other reforms of the Obama Administration, this too was short of real reform, demonstrating once again the timidity of this president and Congress in addressing real reform that matters.

Economically, there are multiple problems with the US and world economy. One way to slice it is to look at short and long term needs. Short term the problems in the economy are the high unemployment figures, the still depressed real estate market, and slow economic growth. Longer term the problems are many, including financial institution instability, energy consumption, and a looming debt crisis.

The bank and financial regulation bill agreed upon last week addresses some of the longer term problems, but not all of them, and does little for the short term. Long term the best potential features of the bill are the Volker Rule to limit bank speculation and the creation of the consumer credit protection agency. At present the agency looks weak but perhaps over time it can use its administrative rule making to actually do real work to help consumers.

Having said the good things, the bill falls short on real reforms. Real reform should have reinstated Glass-Steagall, imposed more requirements on banks holding capital to cover losses, extended more regulations to cover non-bank financial institutions, and made it illegal for institutions to do hedge funds that bet against their investors.

It might have also made sense to consider policies that make it illegal for FDIC entities to speculate on Wall Street, something similar to a Glass-Steagall requirement. Finally, limits on compensation packages for officers to depress financial incentives to speculate make sense. All of these ideas would help, as would be preventing banks from selling office mortgages that finance (so that they have to bear the risk of their loans). However, even with all these reforms, it is still not clear banks will serve the public interest. Remember, they are private for-profit entities that are not there to serve the public good. This is the purpose of government regulation.

Government regulation is meant to address market failures and correct externalities and moral hazards that the free market cannot address. Beginning in 1978 the USA has been on a deregulatory path, placing firm belief in the market over the government. The Reagan-Thatcher era is famous for this. Obama took office with the promise of change, and he has made some, but they have not signaled the full repudiation of the Reagan Era. Ronald Reagan is dead, but we do not see a real return to regulatory behavior anywhere near the like of the New Deal or close to the scope of what is needed for the economy.

The 2009 economic stimulus was too small and we are now paying the price with a sluggish economy on the verge of a second recession. We never addressed the core problem with the economy–the collapsed residential home market–and now it is slipping again and defaults continue. The health care bill ensures more but does little to address cost containment or quality. Consistently, Obama and Congress have gone less the distance to fixing the problems.

Thoughts on Moscow

Last week I was in Moscow, Russia for three purposes. The first was to give a paper at Moscow State University, the second was to give a talk at the American Corner, the third to see friends, the sites of the city, and to see how the city has changed over the last three years.

The paper that I gave was entitled “The Crisis of Public Administration in a Post-Global World.” The basic thesis was that the global financial collapse and the attendant state bailout of banks had effectively killed off the legitimacy of market fundamentalism and theories of the minimal state that had commenced with the arrival of Thatcher in the UK and Reagan in the USA. This paper was part of the a larger conference on public administration held annually at Moscow State University. I have now been to the conference twice, both times having a great time.

The second part of the trip was to give a lecture at the American Corner, Moscow. The US State Department has American Corners around the world, providing cultural information to audiences in different countries. In the past I have given talks at the American Corners in Hungary and Slovakia. My talk in Moscow was on Obama and the 2010 elections. The audience had about 45 in attendance, mostly including students as well as a mixed crowd. They asked good questions about America, expressing skepticism about our financial regulatory reform and the seriousness of the USA in pursuing environmental policy and changes. In effect, they asked where was the US in providing leadership in addressing global warming, for example.

The third and most fun part of the trip was seeing friends, sites, ands how the city had changed. Moscow felt safer to me now than the first time, and even more western than before. Capitalism has changed Moscow, with it being more European in its feel, and less isolated. US business seems generally lacking here, with Germany and the UK more dominant. Perhaps the reason is that the USA is unwilling to change how it does business to access Moscow. I say an article in Russia that indicated that the US chicken or poultry business refused to change the way it operated. Specifically, it used chemicals to clean poultry that were banned in Russia. US business seems unwilling to change to gain accommodate and gain access. It seems as if we think everyone should accept our standards and follow our lead. Such arrogance does little help foster trade.

The one funny thing while in Moscow. I was with two students and we were thirsty and needed a snack. They wanted to go to the new Starbucks that had opened. It was in a new business complex featuring Price Waterhouse. The building was new and built were an old traditional Russian building had stood. This Starbucks was the trendy place for the youth and trendy. As I sat there the background music was Gershwin, Sinatra, and Ella Fitzgerald. The music was the American songbook.

As we toured the city I saw some old and new sites. Of course Red Square was a stopping point, as was Pushkin Square. I also visited the Tretyakov State Gallery–the best collection of Russian Art in the country. I especially liked the Russian Impressionism.

Beyond the tours I visited old friends–Ana and Ana–and met new ones such as Kate, Dunya, and Daria. All were my interpreters or translators. All were or are students at Moscow State University. I had a terrific time with them all.

Overall, Moscow was fun. The larger meaning to this blog entry, if any, is simply that Moscow and Russia are politically and economically important players. The real revolution here will occur when the young students take over and the old generation dies off. The new generation, born after the breakup of the USSR, is full of hope, new attitudes, and a spirit of change and freedom that will really change this country. I had this same feeling in Armenia and Hungary too. Revolution is generational.