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Monday, December 26, 2011

ERIC HOLDER'S WAR ON STATES


The Department of Justice, under Attorney General Eric Holder is fast becoming the most activist anti-state Justice Department in modern history. Supposedly guided by the responsibility to uphold federal law and the Constitution, the Holder Department in recent lawsuits filed against individual states attorney's general is arguably motivated more by ideology and politics. As of November 23, Utah became the latest of four states which are the targets of the Justice Department over state laws related to illegal immigration within their boundaries. The others are South Carolina, Alabama and Arizona.

These states, have found themselves dealing with significant financial, education, health and criminal justice issues resulting from large numbers of illegal immigrants who have entered the countries porous southern borders. The scandal of ineptitude and lack of political leadership by the Obama Administration with regard to border enforcement and the current estimated 12-14 million illegal immigrants residing in the U.S. is well known. The Obama Administration's reluctance to anger open border interest groups within the Democrat Party such as labor unions and Hispanic advocacy groups has led state's legislatures who are most affected, to pass laws similar to the federal laws which are not being enforced. Arizona led the effort by requiring state and local law enforcement officers to verify the immigration status of persons whom they came in contact with over other suspected violations of the law. Other states passed similar laws on the Arizona model even though the Arizona law has been partially enjoined by a federal court while it wends its way through the federal court system which will eventually lead to a judgment by the U.S. Supreme Court. The Justice Department is currently reviewing similar immigration laws which were passed in Georgia and Indiana. The Utah law requires people to “prove their citizenship” if arrested for serious crimes and allows police to check the citizenship of those arrested for lesser offenses.

Alabama has passed what most observers see as the most restrictive anti-illegal immigrant law. It contains provisions which require public schools to verify the immigration status of enrolling K-12 students and disallows enrollment of illegal aliens in state colleges and universities.

The Justice Department says that the federal government has the sole authority over immigration issues and such state legislation “usurps” that federal authority. It further asserts that the state's laws could “potentially”, “lead to”, harassment and detention of U.S. citizens and authorized visitors.

While the Department says it “welcomes” state and local “support” of federal law, when state's legislatures step into the vacuum of federal enforcement to facilitate such “support” the Administration makes a political statement by seeking to block the state's efforts in federal court. Not surprisingly, the government of Mexico has issued a statement in support of the Justice Department's lawsuits.

It is clear that states have a fundamental interest in enforcement of the federal immigration laws since they bear the costs of lack of such enforcement and federal courts should find such support compatible with federal laws and thus constitutional even if some revisions need to be made. Hypothetical effects of “potential” harassment should carry no weight since hypothetical effects are endless and actual cases of harassment can be litigated if and when they ever happen.

South Carolina, a reliable “red state” and its newly elected Republican governor, Nikki Haley, seems to be an appealing target for Attorney General Holder. While the immigration lawsuit goes on, his Office of Civil Rights has, under authority granted to it by the 1965 Voting Rights Act, rejected recently passed state legislation which requires voters to provide a photo ID at the polling place. South Carolina has a large black population, who are themselves reliable votes for Democrat candidates. Holder's Justice Department claims that the photo ID requirement discriminates against these minority voters because they are “20% more likely” than white voters to lack such identification. Under the Voting Rights Act, several southern states with a history of voting rights abuses against black voters, must gain Department of Justice approval for any legislation which might change voting opportunities for minorities. However, this action by the Office of Civil Rights lacks credibility on several fronts.

The requirement applies to all voters; photo IDs are required for many transactions nation wide i.e. credit card purchases, airline boarding passes, driving privileges, etc. Voting fraud is a reality as evidenced by numerous Illinois scandals in the past and the recent defunding of liberal advocacy group Acorn which was found to be registering fictitious voters. The South Carolina law accepts five different types of photo ID for voting purposes including a free one which can be obtained from the state especially for use in voting. Thus most registered voters will have one and anyone can obtain one.

Twenty states have similar laws and eight states have recently passed them. Besides South Carolina, Texas, Mississippi, and Alabama fall under the requirements of the 1965 Civil Rights Law. The Georgia and Indiana photo ID laws have received federal court approval. The Indiana case, which was a lawsuit brought by liberal advocacy groups, went all the way to the Supreme Court. The Court in a 6-3 vote (2008) found that the law was “not unconstitutional and that the state has a valid interest in improving election procedures as well as deterring fraud.” The Court rejected the same claims now being made by the Department of Justice in the South Carolina case, that the poor, the old and minorities would be disadvantaged. Indeed, liberal Supreme Court Justice John Paul Stevens (now retired) wrote an opinion in support of the Indiana law and rejected claims that the law was an invalid political maneuver by Republicans. “The justifications for the law should not be disregarded simply because partisan interests may have provided one motivation for the votes of individual legislators.” As in the recently passed South Carolina law, the Indiana law provides for a free government issued photo ID if registered voters lack one of the more common ones.

In the face of this powerful precedent, it is hard to explain why the Holder Justice Department has rejected the South Carolina law, which will almost certainly be appealed to the federal courts. The only explanation for both this and the immigration law suits must be that the Obama/Holder Justice Department has become a campaign tool and is trying to energize the liberal Democrat base for the 2012 presidential election.

Friday, December 9, 2011

THE PRIMARY SYSTEM: TIME FOR A CHANGE?





In August Michelle Bachmann won the Iowa Republican presidential nomination “straw poll”.  Political commentators and media pundits were effusive while bestowing on her the “front runner” label. Howard Fineman, then of Newsweek and currently of the Huffington Post, advised candidate Newt Gingrich, now leading polls in Iowa and nationally, to quit the race after only winning 385 of the 16,674 votes cast, and because of her status of “front runner”, Bachmann appeared on all five of the Sunday morning political talk shows after the poll. This is because it has long been part of the media's political lore that the winner of the Iowa caucuses, which follow the straw poll five months later, and are the nation's first nominee selection process, has a major advantage in subsequent contests.


While it is understandable, though unfortunate, that the news hungry media inflates the importance of this early exercise, in reality it makes no sense. A few statistics show why.
Iowa has a total population of approximately 3 million or about 1.1 times the size of the city of Chicago. It is 91.3% white and 38.9% live in rural areas. An estimated 37%-40% of Republican voters in Iowa self identify as religious evangelicals. This pushes the political debate and campaign style of the candidates away from the most important issues and towards the so called “social” or “value” issues on which the president has little influence (abortion; gay marriage; school prayer; evolution). 


In 2008, John McCain, the eventual Republican nominee, won just 13.1% of the total 118,696 Republican caucus votes cast in January of that year. Clearly Iowa voters are in no way representative of the national electorate.
“Judd Saul, founder of the Cedar Valley Tea Party who considers himself a member of the Christian right said he was more concerned with “values than perceived electability”. "We live in a society where everyone judges talent. We sit in our living rooms and watch American Idol, and we become a society that judges what is talent," he said. "We're looking at people for the wrong principals."

In other words he thinks competency for the most important political position in the world should be subordinate to the personal values of the voter. He said he was not alone in his beliefs. "The really hardcore right is hardcore Santorum," he said.

Recently the Rev. Cary K. Gordon, a Sioux City evangelical leader who was prominent in the defeat of three Iowa Supreme Court justices over gay marriage, endorsed Rick Santorum. Santorum's appeal is almost entirely based on his inflexible opposition to abortion under any circumstances. Santorum is currently polling in Iowa at 5.1% and nationally at 3.3%. While this is not significant, the three most socially conservative candidates who brandish their fundamentalist religious views in Iowa as campaign strategies, Santorum, Bachmann and Perry, all in single digits individually, are polling at a collective 21% of the vote thus distorting the process. A November New York Times/CBS poll of Iowa's evangelicals found that only 10% of would consider voting for former Massachusetts Governor Mitt Romney for no other reason than he is a Mormon, a religion that Mormons themselves say is a Christian belief system. These intolerant voters are either ignorant of, or choose to ignore, the fact that there are currently six Mormons serving in the U.S. Senate and nine Mormons serving in the US. House of Representatives from both parties, all with no apparent negative effect on the quality of their service or the moral character of the nation. Outside Iowa, an ABC News/Washington Post poll found that 75 percent of Republicans nationwide said “it does not matter one way or another if a candidate for president is a Mormon”. This is another indication that the Iowa caucuses have diminished relevance to the national election in November where voters are more concerned with economic issues and the intelligence, knowledge and leadership qualities of the candidates. 


Even current front runner, Newt Gingrich, a recent convert to Catholicism, who has lead what some observers might describe as a “secular” lifestyle, has felt compelled to join the anti-abortion, anti- gay rights campaign style. Gingrich now says that “marriage should be between a man and a woman”, or in Gingrich's case, three women. 


The situation in New Hampshire doesn't get much better. While a more secular state, New Hampshire has the nation's first primary (vs. caucus). The importance of a win or second place showing in New Hampshire is a well established but nonsensical fact. The population of New Hampshire is approximately 1,316,000 or just 44% of Iowa's. It is 93% white and only 18% of the population reside in the three cities with populations over 30,000. New Hampshire is a really nice place to visit but as a tiny rural enclave it's role in the presidential primary selection process is clearly over emphasized.


It has been a common observation among the punditocracy that wins in Iowa, New Hampshire and a strong showing in South Carolina by any candidate means that the nomination battle “is over”. Even if those were the actual results for one of the candidates, and might indeed shift momentum and money raising efforts, it would at best be a self fulfilling prophecy and at worst a major distortion of the electoral process. The marathon primary battle in 2008 between Obama and Hillary Clinton, while it did not follow this scenario, showed the importance of the voters in the later primaries.
In their race to be “important” by staging early contests, the four states with January caucuses or primaries (Iowa, New Hampshire, South Carolina, Florida) select only 115 total delegates out of the total of 2,066 who cast votes at the Republican convention in August. The idea that three of these or even all four should decide the nominee even if one candidate wins all, is ridiculous.
The primary process lasts until June 26th when Utah has the final primary. Eleven states have primaries on March 6th and the four largest states (Texas, New York, Pennsylvania, California) with a total of 494 delegates or 23.9% of the total, have primaries from March 6th to June 5th


The “horse race” competition created by the media and the pandering to small under-representative constituencies to the possible exclusion of large numbers voters in other states could be eliminated by establishing a single, nation wide primary/caucus date. This procedure works well in some Western European nations and by scheduling such a primary in the Spring or early Summer, it would provide plenty of time for candidates to be thoroughly vetted and avoid the wasting of resources by over spending in the early states with single issue or non-typical constituencies.


It would also open the process to credible candidates who don't appeal to narrow constituencies in the current early primary states or because of low initial name identification, need more time to develop support. Current candidate John Huntsman falls into this category and several other credible Republicans including New Jersey Governor Chris Christy, Indiana Governor Mitch Daniels and Mississippi Governor Haley Barbour might well have taken a serious look if they felt the campaign would be an appeal to voters nation wide.


Primaries and caucuses are essentially the “property” of state party committees and any effort to persuade them to join a single national primary would be difficult, especially in those states who somehow see some kind of prestige in being “first” or “early”. But some progress was made in this direction by the establishment of the so called “super Tuesday” primaries conducted by eleven states on March 6th of 2012. It would be a significant improvement to the important presidential selection process to diminish the influence of the pundits, press and small and early states and allow full participation in the nominating process by the same voters who will select the President.

Thursday, December 1, 2011

IRAN: TIME AND OPTIONS RUNNING OUT

     
Since the Iranian revolution in 1979, the theocratic state that emerged has been a dangerous international outlaw in a dangerous, unstable region. In recent years it has sought to become the dominant regional player by supporting religious fundamentalist/terrorist factions in perennially unstable Lebanon (Hezbollah), in the breakaway Palestinian territory Gaza (Hamas), and anti-government, anti-U.S. militias in Iraq and Afghanistan. It also has sought to divide the Arab world by cultivating an ally in Syria and taking a hostile stance towards Saudi Arabia.

Over the last few years, while developing the capacity to develop nuclear weapons, it has spurned all efforts by the international community, acting through the United Nation's International Atomic Energy Agency (IAEA), to inspect and verify its claims that its nuclear program was exclusively for domestic energy purposes.

The international response to Iran's intransigence via the United Nations has been low key rhetoric about the "unacceptable" nature of their “research” program and a series of minimal and ineffective economic sanctions. Now the Iranian government has once again demonstrated its disdain for international standards of behavior and universally accepted international law, by fomenting an attack on the British embassy in Teheran. President Obama's reaction to the assault was: he was "deeply disturbed".

After the futility and naivete of Obama’s attempt to “extend the hand of friendship” to this pariah state, this latest demonstration of aggression, following the latest IAEA report, demands a continuing, serious, and robust international effort beyond what has been implemented, to make Iran’s religious leadership aware that they have reached the limits of hostility and intransigence versus the West.

The proximate cause of the attack on the British embassy was the imposition of the most recent economic sanctions on Iran by the British government in relation to Iran’s nuclear program and the above mentioned report by the IAEA that Iran was conducting nuclear computer tests with military applicability, and then,yet another rejection by Iran of the UN’s demand that inspectors be allowed to evaluate their nuclear program.

The Iranian government's nuclear development program has been on going since approximately 2002-2003. Repeated demands by Western nations and the UN for inspections have been rebuffed. Only after years of stalemate on this issue has pressure in the form of economic sanctions been applied. Attempts to impose economic sanctions that would be in theory, universally applicable through the UN Security Council, have proved difficult because of the opposition of China and Russia, both of whom have a veto. Thus, on the UN level, only weak sanctions have been possible. The latest effort, UNSC Resolution 1929, passed in 2010, only extends a ban on armaments and on economic transactions specifically related to nuclear weapons technology.

Outside the UN, the U.S, Canada and the European Union have adopted more rigorous economic sanctions relating first to banking relationships and financial transactions, and then with the the passage by, the U.S. Congress in 2010 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act, which contains the earlier proposed Iran Refined Petroleum Sanctions Act of 2009. These provisions are the most punitive sanctions implemented so far in any venue. Iran, which is the world's fourth largest petroleum producer, has limited refining capability and thus imports roughly 40% of it's refined products i.e. gasoline, diesel, heating oil. Unfortunately, although the U.S. has influence over some of the world's refining entities, U.S. law does not apply directly to the major suppliers of Iran's refined product needs. Approximately 80% of Iran's imports come from two Dutch based energy companies.


Iran remains defiant and with the protection of Russia and China in the Security Council, the weak UN sanctions and even the more robust U.S., EU and Canadian sanctions are simply painful inconveniences. Thus the problem of finding a workable strategy on the part of those seriously concerned about the prospect of a nuclear armed Iran remains.


The conventional wisdom regarding the efficacy of economic sanctions in pursuit of their primary goal, the modification of the target state's behavior, in this case, the acquisition of nuclear weapons, is that they don't work. The fundamental reason for this, especially with regards to general trade embargoes, is that there are always non-complying nations and entities that continue to trade in essential goods with the target state. In the case of Iran, numerous states fall into this category. However, this does not mean that economic sanctions directed at Iran should be be abandoned. Iran is still several years away from having an operational nuclear weapon and a viable delivery system. Meaningful sanctions impose a cost on Iran and send a message of broad consensus among the world's leading economic powers and four (U.S., France, UK, Israel) of the current nine (Russia, China, Pakistan, India, N. Korea) nuclear weapons states that Iran will continue to pay a price if it achieves nuclear weapons status as well as being the target of enhanced military deterrence strategies.






Critics of economic sanction policies always complain that they impose harsh conditions on “innocent” civilian populations and not the governing authorities and are thus unjust and ineffective. But this is a flawed position. It is not possible to separate the political authorities of a nation and the general population into two distinct and opposing groups. The Iranian revolution and take over of the U.S. embassy and the resulting hostage crisis in 1979 itself, demonstrated the public support for the new anti-west, anti-liberal theocratic government. A weak reformist political movement which has since developed does not have the support of the full Iranian population as the recent take over and ransacking of the British embassy makes obvious. Economic sanctions make clear to the general population that the policies of the government are unacceptable to the international community and place them in danger of more harmful circumstances that could easily spin out of control. 
 
Economic sanctions are an alternative to military action and thus more acceptable to the international community and less harmful to the target nation's general population. In the current situation, the prospect of failed economic pressure and diplomatic isolation could lead directly to a military strike against Iran's nuclear facilities and a regional war. Thus the imposition of even more punitive economic sanctions becomes a last resort to a major regional crisis with potentially devastating consequences. 
 
The main weaknesses in the economic sanctions efforts remain China and Russia. China is aggressively engaging Iran in a rapidly growing trade and investment relationship with Iran as a major purchaser of Iranian oil and investor in Iranian energy development. Bilateral trade was $30 billion in 2010 and is estimated to grow to $50 billion by 2015. Russian bilateral trade was only $2 billion in 2010 but will grow rapidly as Russia provides nuclear technology, oil and gas equipment and consumer goods. Russian energy giant Lukoil, in conjunction with China's Zhuhai Zhenrong energy company have recently completed a huge sale of refined petroleum to Iran in opposition to the West's refined products embargo on Iran. 
 
While the depth of these economic relationships make cooperation on economic sanctions against Iran problematic, negotiating efforts could still possibly produce some progress. Obama made a major concession to Russia when he abandoned the Bush administration's plan to build a missile shield in Poland and the Czech Republic as a defense against the future development of Iranian long range ballistic missiles. Russia was vehemently opposed to this plan and Obama could have used it as leverage to negotiate Russian cooperation on Iran. Instead the abandonment of the plan in 2009 without conditions, had the look of Obama's simplistic “reset” of the U.S. relationship with Russia. Now Obama has announced a modified plan to place interceptor missiles capable only of destroying Iran's intermediate range missiles in Romania and Poland along with an early warning radar system in Turkey. Russia is now threatening to target these facilities unless concessions are made with respect to their operation and control. This again provides an opportunity to negotiate a modification of Russia's position with respect to Iran if Obama should take it. An aggressive and nuclear armed Islamic theocracy on its border should also be a significant concern to Russia who somehow finds an American/European anti-missile shield on its borders to be a security threat.


Additionally, since Russia and China's reluctance to join in deterring Iran from becoming a nuclear power is primarily based on Iran's petroleum and gas resources, there is built in contradiction with the prospect of the military strike end game. Israel is preparing for such a strike, Obama says it is “on the table”, and all the credible Republican presidential candidates say it is the last option. Such an attack would in all probability result in counter strikes by Iran and then secondary strikes by Israel or even the U.S. Such a scenario could have a huge impact on the availability of Iran's oil supplies and investment opportunities in that sector. As the prospect for military action becomes greater it would be in both Russia and China's interests to persuade Iran to pursue another course. 
 
This is the most serious foreign policy issue currently facing the U.S. and the Middle East region. Robust diplomacy based on increasingly coercive measures seems to be the only course available as simple persuasive diplomacy based on reason has been consistently rejected by Iran. The U.S. is not without leverage with both Russia and China and it is important that President Obama engage in that effort.



































Monday, November 21, 2011

GOING, GOING, GONE? POLITICS ETC.




If things seem chaotic from state level politics all the way up through the international level, they are.  However, out of the turmoil it's becoming clear that the sun is setting on a number of phenomena, some gratefully some regrettably.  The hangers-on, disbelievers, and media over interpreters won't give up easily but here's a short list of sinking ships to take note of.

Herman Cain
:    It was fun while it lasted but Cain's shooting star ascendance and subsequent flame out was in retrospect inevitable.  His popularity was/is mostly based on his engaging personality with it's "I'm not wrong; they just don't understand; " "I'm not a politician" stage presence.  But his whole attempt at substance was wrapped up in his "9-9-9" plan for tax reform and after its initial promise of being simple and fair, further analysis couldn't make the numbers work.  In terms of necessary revenues to restrain a growing deficit and federal debt, or "fairness" with respect to its impact on different classes of tax payers, it came up short.  The personal financial  implications of the third "9" which is a 9% federal sales tax were also starting to sink in to voters, as well as the political implications to his opponents.  

Still, sufficient numbers of Republican voters from the social conservative and anti-Washington wing kept Cain's support stable, although not growing, in the 23-25% area.  But "9-9-9" wasn't powerful enough to protect Cain when the bottom started to drop out over the revelation of a decade old series of sexual harassment complaints.  The veracity of these complaints has yet to be proved and the fact that the timing of their public release after 10-11 years is clearly an attempt by political opponents to destroy the Cain campaign, has not sufficiently mitigated their impact.  But then, in a series of interviews,  Cain demonstrated an astonishing Palinesque  level of ignorance about international politics  which made him seem even more vulnerable politically and less prepared to assume the nation's highest office.

First, even before the harassment controversy, he was asked if he agreed with George Bush's neo-conservative philosophy which was the basis for the Iraq war. Cain said simply that he was "not familiar with the neo-conservative "movement".  More recently he claimed that China was trying to develop nuclear weapons, apparently ignorant of the fact that they have had such weapons since 1964. But the most crippling demonstration of "in the box" thinking occurred when asked whether he supported Obama's policy with respect to the Libyan revolution.  He simply couldn't answer and remarkably seemed not to know that the six month NATO intervention and the expenditure of $2 billion by the U.S. in support of the insurgency which led to the killing of dictator Muammar Gaddafi had even occurred. 

Cain, not surprisingly, but still unfortunately, says he’s in for the duration but his support is dwindling and it’s a safe bet to wave good bye to Herman as a serious candidate.

Occupy Wall Street
:   It took off with a bang on September 15 and quickly spread around the country and Western Europe.  But over time, the differences in the various protests became evident as did it’s fundamental organizational flaws and lack of purpose.  In Spain, there was already a youthful protest movement based on high unemployment.  In England the primary complaint was significant tuition increases which were part of the coalition government’s budget reducing austerity program.  But even in the U.S., despite the use of a few common slogans i.e. “We’re the 99%”, it eventually became clear that the protest movement was about anything any participants wanted it to be.  Thus the home made signs , which are the “message of the movement” indicate that this is a protest about:  the capitalist economic system; inequality of wealth; environmental activism; student loans; global warming; lack of housing for the homeless; anti-war protests; legalizing marijuana; freeing Wikileaks traitor Pvt. Bradley Manning, and pretty much everything else commonly associated with Left wing causes.  

If the protest is about everything, it is about nothing.  Even if it were to focus on the original complaint, "corporate greed", that is not a legislative program.  But of course that's part of the attraction to the movement's core group, the "twenty something", counter culture fringe that every generation seems to produce.  You don't have to know anything to simply camp out in a commune like atmosphere, pound on drums and guitars, and wave simple minded signs and banners, to be a "revolutionary".  It's all fun and no work.

Of course there are other components to the movement; homeless hangers on and weekenders like the usual group of self righteous college students and self serving union activists, but as a group, the movement has demonstrated such a high level of self indulgence, lawlessness and disdain for the rights of the surrounding populations that they have worn out their welcome in cities across the country.  Even in liberal communities like New York City, Portland Oregon, Denver and remarkably, the "people's republic of Oakland", municipal authorities have had to respond to the complaints of the business community and ordinary citizens who can't take off time from work and families to camp out for two months and who don't think their lives should be disrupted by those with nothing else to do.  Thus, one by one the illegal and fetid camps are being cleared.

All this has resulted in a dramatic loss of public support for the movement.  Public Policy Polling reports that only 33% of responders now "support the goals of the OWS movement." It is fair to speculate that a much higher percentage does not support their tactics.  Indeed the movement now relies on physical confrontations with police to generate headlines and sympathy.  Leftist commentators now write less about  "inequality" and more about alleged “police brutality" which they define as any effort by police to remove or control mobs who refuse to comply with municipal laws and resist arrest.

The movement was always more about process, i.e. camping and protesting, than about product i.e. legislative remedies to economic issues.  Now with declining public support, more robust and common sense enforcement of municipal laws, and the onset of winter weather, OWS has reached a tipping point.  It will not disappear, especially in more temperate climates, but it will slowly exhaust itself.  While the originators of the movement, a couple of Canadian journalists, claim that the movement will not decline, they at the same time acknowledge that it will have to change tactics.  "With or without winter encampments", the new tactics they are recommending are:  "marked escalation of surprise"; "playful precision disruption"; "rush hour flash mobs"; "bank occupations"; "occupy squads" and "edgy theatrics".   Ignoring the fact that getting large groups together without encampments will present great difficulties, "playful disruption", "rush hour flash mobs" and "bank occupations" are tactics which clearly reveal the genuine purpose of the movement which is to perpetuate their irresponsible self indulgence and disrupt the lives of the rest of the "99 percent" who they claim to represent.  These tactics will further reduce public support and stimulate more confrontations with authorities to the further discredit of this exercise in irresponsibility.

Federal debt reduction
:   With the failure of the "super committee" of Congress who had been charged with formulating  a debt reduction plan of 1.2 trillion dollars, it is clear that the Congress lacks the wisdom and political courage to tackle this enormously important issue.  This of course, is no surprise.  Even a "successful" outcome would have required only a reduction of 120 billion dollars a year for ten years.  In the face of current annual federal deficits in the area of 1.3 trillion dollars, and now an accumulated federal debt in excess of 15 trillion dollars, the goal, if achieved would have been mostly a symbolic victory.  While symbolic achievements might have given some confidence to  lenders, investors, producers and consumers, it would essentially still have deferred the problem.  It is clear that the ideological divide in the current Congress and the political environment created by the upcoming 2012 national elections make any significant progress in the area of fiscal responsibility impossible. The “automatic”, across the board ten year cuts of 1.2 trillion dollars which are supposed to result upon the failure of the super committee will probably not come about in spite of President Obama's threat to veto any modification legislation.  The cuts are not supposed to commence until 2013 and the next Congress will not be obligated to carry these cuts forward, also Obama may not be president after January, 2013.  Already, Defense Secretary Leon Panetta, along with Republican conservatives are vowing to amend the estimated 500 billion dollars in cuts to defense spending required under the current legislation.  Such an effort would stimulate a similar demand by Democrats to reduce the cuts to domestic programs and the whole effort would fall apart.

The best remedy now available is the election itself if it can produce a majority government.  A majority Democrat government, while improbable at this point, would not be inclined to make significant cuts in spending however, and since their strategy of tax increases is clearly not sufficient to make significant deficit/debt reductions, the problem would continue to grow to unsustainable levels. 

A majority Republican government, while more probable, though in no way certain, could bring about major spending reductions, although such proposals could expect to face Democrat filibusters in the Senate.  However, reductions of the magnitude required without some increases in revenue through new or higher taxes and elimination of deductions would slow economic recovery.  Currently the prospects are for a post election continuation of divided government with the Senate remaining in Democrat hands, no matter which party controls the White House. 

Good bye to the super committee and to meaningful economic reform for the foreseeable future.

There are several other important entities and programs on the endangered species list, a couple are;  Greece, which may be too far gone into government debt to save as a member of the 17 nation Euro zone and whose economy may eventually implode.

 Any hope for a sensible, workable U.S. immigration policy, as Obama has not proposed a policy, has now ordered  Immigration and Customs Enforcement (ICE) to stop deporting illegal immigrants who are not criminals, thus waving a welcome sign to millions more illegal immigrants, all the while pursuing his law suits against the states of Alabama, Utah and Arizona who, in the face of the federal government's failure to act, passed immigration control measures of their own.

Americans are to be forgiven if they ask:  "Is anyone in charge?"

Saturday, November 12, 2011

CAIN'S PAINS

As if the Republican presidential nomination campaign wasn't ridiculous enough with its Dancing With The Stars marathon of repetitive and superficial debates, numerous drop in and drop out candidates and hyper-partisan pundit "analysis", now we have the sex scandal "de jure" to contend with.   Following the trend set by Senator John Ensign
 (R: NV), Governor Mark Sanford (R: SC), Governor Eliot Spitzer (D: NY), Congressmen David Wu (D: OR), Mark Foley (R: FL) and Anthony Weiner (D: NY), Democrat presidential candidate John Edwards, etc. etc. etc. , Herman Cain is now in the media and political cross-hairs. 

In truth, the initial revelations lacked substance.  Cain was not accused of actual sexual dalliances but of the overly broad charge of "sexual harassment". No alleged victims were identified nor were details of the alleged offenses provided.  In these circumstances Cain was simply able to deny the charges and attempt to bring closure to the whole affair.

This tactic fell apart with the latest accusation brought not by second hand reporting but by an actual person.  Sharon Bialek from Chicago appeared with her lawyer Gloria Allred to describe in detail an episode involving a physical encounter with Cain in an automobile.  Shortly afterwards one of the previously anonymous complainants came forward.  Karen Kraushaar, now a federal employee  received a $45,000 "settlement" from the National Restaurant Association in 1999 after filing a sexual harassment complaint against Cain who was the President of the association at the time.  The lawyers for the two women are trying to arrange a joint press conference with the other still anonymous complainants to describe their experiences.

What does all this mean?

First, the claims by Kraushaar and the two as yet unidentified accusers remain unclear.  Earlier reports described them as verbal encounters that made the women feel "uncomfortable".  Kraushaar has since expanded her description to "inappropriate behaviors" and "unwanted advances".  While these general descriptions would be sufficient to make a claim under EEOC regulations they would not be successful without specific and detailed descriptions of the alleged "behaviors and "advances".  Their political impact can also expected to be minimal in the absence of these details but if the joint press conference actually comes about, it seems certain that details will be forthcoming.

The claims by Bialek are much more potentially damaging because of their specificity.  While they do not fall into the legal definition of sexual harassment because that category of offense only applies to workplace conditions and Bialek was unemployed at the time of the alleged encounter, they could have been the subject of a criminal complaint for assault if she had chosen to make it at the time.

Still, questions remain which give some credence to Cain's denials that the incidents ever happened.  First, the question of timing:  Why now, after a decade has passed, are these charges being revealed?  There can be no other answer for this except that the women are trying to destroy Cain's candidacy.  What other motive can there be for the delay?  Cain has been a public figure for many years; a candidate for President in 2000 and for the U.S. Senate in 2004; and a radio talk show host.

Why do these women need lawyers? Kraushaar might have sought legal council in 1999 to assist in filing her harassment complain but there is no obvious reason for her to retain counsel just to make a public disclosure of a past complaint.  Bialek has retained Gloria Allred, which by itself gives her complaint the bad smell of artificiality.  Allred is a publicity seeking, California celebrity lawyer specializing in publicity seeking complaints from publicity seeking clients.

The fact that complaints were filed is a political problem for Cain but the fact that none were ever adjudicated against him because in two instances litigation and publicity avoidance "settlements" were made, and in the others no claims were ever made, leaves the issue of Cain's guilt undecided.

However, the campaign is not a court room and no rules of evidence or preponderance of evidence standards apply.  Voters will make up their own minds based not only on the credibility of the complainants but on their pre-complaint opinions of Cain as a spokesman for their political preferences and ideological orientation.  Essentially, those who like him a lot will remain loyal. Evidence of this already is apparent.  The danger for Cain is that his denials will lack credibility to less fervent supporters and to those voters who remain undecided about which candidate to support.  Evidence for this is also apparent as his poll numbers in some polls have shown a decline.

In this respect the "electabilty" issue becomes more important as a consideration as opposed  to personal preference.  Cain's hard core conservative supporters don't seem to care about this issue or have simply convinced themselves that he can actually beat Obama anyway.  This is in spite of the harassment issue and its sensitivity to female voters and his previously identified knowledge deficits in the area of foreign policy as well as his clumsy retractions of statements regarding immigration and abortion. 

It is difficult to predict to whom potential Cain defectors will turn if he doesn't recover.  Cain's current support seems to be coming from the far right.  That would indicate that Perry or Paul would be the beneficiaries of loyalty transfers.  But New Gingrich has been slowly climbing in the polls and is probably the most articulate and experienced proponent of conservative ideas so he could benefit if socially conservative voters can forgive him for his multiple marriages and seemingly callous divorces.  Early polls seem to indicate a trend in this direction. In any case a depletion of support for Cain who is currently in first place, and a distribution of that support among the rest of the conservative candidates would help Romney, who is in second place nationally, the most.

Republican voters whose main goal is to defeat Obama need to consider what a Cain campaign against Obama would look like in the face of these harassment allegations.  Debates with Obama would inevitably make the allegations a continuing subject of discussion.  Campaign appearances around the country would be certain to bring out disruptive sign carrying protestors repeating and exaggerating the charges.  At the very least these would be a distraction and like debate questions force Cain off his economic message which is his strength.

It's too early to declare Cain's campaign dead.  More revelations about the accusers may come out which detract from their credibility and if so the issue could fade.  However, it is more likely that more information which supports their claims or that more accusers will come forward, whether or not they have credible stories to tell.  Unfortunately that's the jungle like atmosphere of modern day elections and goes a long way in explaining why more highly qualified candidates choose not to enter the fray. 

Friday, November 4, 2011

CUT, SPEND, TAX? THE EUROPEAN LESSON

While the Congress and the White House seek simultaneously to find a workable campaign strategy and an actual cure for the nation's sluggish economy recovery, the debate essentially is whether to engage in additional significant government spending or reduce taxes to stimulate economic growth and thus job creation while cutting spending to reduce the annual deficit and enormous outstanding federal debt. 

Economists agree that increasing the money supply i.e. putting more money in the hands of consumers is the best strategy for increasing demand for goods and thus stimulating production and job creation.  The debate is about which method is best to do that.  The Federal Reserve which is in charge of monetary policy has been doing this on a grand scale with it's bond purchase programs of "Quantitative Easing".  Obama's "stimulus" program of 700 billion dollars of federal spending was also intended to achieve this goal. 

So far, along with two years of interest rates at historic lows, the strategy has failed to  produce much relief.  In the mean time, the 2011 federal deficit came in at 1.3 trillion dollars and the accumulated federal debt is now 99.6% of Gross Domestic Product (GDP) at 14.3 trillion dollars and growing.

Meanwhile, the whole world is watching the economic crisis that is unfolding in Europe.  This crisis has vast implications for the world economy and the U.S. economy in particular and should provide some insights into the proper strategy for the Congress and the President to shape our own response to the jobs and growth issue.

Economic issues are complex and economic policies often have circular or contradictory influences.  However, essentially the European crisis, which is centered on the Euro Zone of  seventeen nations which have shared a common currency since 1991, is about "sovereign (govt.) debt" which has been used for decades to finance excessive government spending on ever expanding advanced welfare states.

Only Greece is in intensive care but Italy, Spain and Portugal are all in the emergency room.  The symptoms are instructive.

Greek debt in 2010 was 143% of GDP.  A majority contributor is the huge number of public sector employees with generous benefits and retirement.  Twenty-five percent of Greek workers are public employees. The Euro Zone nations, the European Central Bank  and the International Monetary Fund (IMF) have been pumping billions of Euros (currently 1.375 per U.S. dollar) in loans into the Greek government to keep them from defaulting on their debt which is in the form of government bonds held mostly by Greek and European banks.  The last bail out deal negotiated by the European Central Bank (ECB) and the Euro zone nations is to be a 50% write down on outstanding bonds, an additional cash loan of 130 billion euros and an additional round of austerity cuts to Greek government spending.  Although this is intended to avert a default, a 50% write down on investments held by private banks and pension funds "is" a default.  And it may not be sufficient to permanently correct the Greek crisis.  Banks in the other at risk economies in Europe will feel the loss of capital on top of the risks associated with their bond holdings from their own and other at risk nations.  Italy's potential crisis dwarfs that of Greece.  Italy's sovereign debt is approximately 2.6  trillion dollars or 119% of GDP (2010).  In Spain the numbers are 917.4 billion dollars and 65.2 % plus regional government debt of 12.4 %;  in Portugal, 213 billion dollars and 93%.  These are already high tax countries, a necessary condition to support the cradle to grave social programs and subsidies demanded by their Left leaning electorates.

Members of the U.S. Congress and the President are faced with similar issues.  The U.S. is not going to default since the dollar is the primary international reserve currency which most nations use to engage in international trade.  Unlike Greece and the others, the U.S. is thus able to print currency for payment of international debts.  While this deters actual default, it devalues the currency making everything imported more expensive and causing large holders of dollar reserves like China (1.6 trillion) and Japan (765 billion)  uneasiness as their reserves lose value.

The President's "jobs bill" would spend an additional $447 billion on grants to states to hire or retain public service workers, and create an "infrastructure bank" to spend money on "bridges, roads, and damns" etc. which would provide short term work for the construction industries and their related support industries.  If it works, it would create a temporary jobs stimulus before the funds were expended and would put more money into the economy.  Obama wants to offset some of the increased debt incurred with taxes on his political nemesis, the "rich".  Republicans in the House and some Democrats in the Senate have opposed the plan and it is dead, in spite of Obama's country-wide campaign tour touting it.  Taxing the "millionaires and billionaires" to reduce the deficit is a favorite Democrat strategy.  Whether this is a viable strategy from an economic standpoint depends on what taxes are raised, how much might be raised, and the definition of “rich”,  as opposed to how much the impact of investment loss on the economy would be.  It is generally popular across the country but the Republicans remain adamant in their opposition to any new taxes and  have conceded the campaign issue involved, which may well hurt them in the 2012 elections.

But the European crisis should have an impact on U.S. decision makers with respect to the spend or cut choices they face.  All the proposed cuts to future deficits, currently running at 8.6% of GDP, simply cut the rate of growth of the deficit so the accumulated federal debt will continue to grow.  The interest on the debt alone added $454 billion in fiscal year 2011. In the last decade (2000-2010) the number of non-military federal employees has increased by 138,000 and currently stands at 2,840,000.  In Greece, 20% of earners blatantly evade taxes.  In the U.S. 47% of families pay no federal taxes at all because of tax credits and deductions.  The lessons are there to be learned.

Greek social programs and the huge number of government employees needed to run them offered cash payments for:  old age; disability; maternity; funeral expenses; lost income from sickness; medical expenses; workmen's comp.; unemployment insurance; family allowances; spa treatments and more.  The so called "austerity" measures the governments of Greece and Spain are implementing seem minor with respect to their debt problems but are instructive in that they indicate the strategies of the IMF, ECB and Euro Zone governments.  These include raising sales taxes; freezing old age pensions; reducing public worker's pensions; increasing retirement ages; cutting public workers wages; and legislation to make it less costly to hire and fire workers.  Spain has passed a quasi-"balanced budget amendment which restricts future deficits to .4% of GDP and will reduce total government debt to 60% of GDP by the year 2020. 

The Socialist Party government of Greece is facing a parliamentary "no confidence vote" shortly, which if passed would cause the government to fall.  The Socialist Party government of Spain is expected to lose in the upcoming national elections in November.

Again, the U.S. is not just a big Greece.  Greece is a small country with an economy mostly based on agriculture and tourism.  But the dynamics of advanced welfare states are like physics, they are the same everywhere.  Liberals point to the relative economic stability of the Scandinavian welfare states but these are small, low growth, relatively homogeneous nations with populations similar to mid-sized cities in the U.S. and with virtually no international security responsibilities or military budgets.  As the poorer segments of their societies, much of it caused by immigration, slowly overwhelm their welfare systems the same symptoms will result. 

In Greece, attempts to cut spending always run up against a tradition of strikes and violent protest which historically have intimidated Left leaning governments and perpetuated the upward spiral of deficit spending.  Now, faced with relatively similar levels of out of control spending, the U.S. is also facing the so called Occupy Wall Street protests which are as uninformed about economic realities as their Greek counterparts.  These groups are making demands for debt forgiveness, guaranteed incomes, free health care and college education and they don’t understand the basic contradiction between their demand for job creation and their “Destroy Capitalism” banners.   They are also taking the inevitable turn towards irresponsible violence.  Their influence on the political leadership is hard to estimate but they have been embraced by the far Left Pelosi wing of the Democrat Party, as well as organized labor and the “progressive” commentariat. 

All spending cuts are difficult and painful because all spending benefits specific groups.  But there is an end point to all government expansion when wealth production doesn't match wealth consumption and even the most socially liberal governments, as in Greece, are called to account. 

Because of its huge size and its unique position in the world’s economy, the U.S. still has some flexibility in terms of priorities, strategies and timing but the European example cannot be ignored.  The question is, will common sense or ideology prevail.

Wednesday, October 26, 2011

FLAT TAX FEVER

Republican presidential candidate Herman Cain has generated much attention with his
"9-9-9" plan to reinvigorate the economy, as well as his campaign.  The plan starts with eliminating the current multi-bracket federal individual tax system and replacing it with a single bracket; a "flat tax" of just 9%.  It would also reduce the corporate tax rate to 9%.  The obvious loss of federal tax revenue by such a change would be partially made up by eliminating most tax deductions.  Cain also sought to enhance revenue sufficient to eliminate federal deficits and reduce the federal debt by the imposition of a federal sales tax of 9%.

Cain claimed that his plan is "bold" and indeed it is, and he was rewarded, at least temporarily, by a jump in his poll numbers, actually leading former front runner Mitt Romney by a small percentage, with both around 25%. 

This is not a new idea.  A "flat tax" has been discussed among conservative politicians and economists for years.  In the current campaign, candidate New Gingrich has been one of those and has recently offered a more detailed description of his own.

Now comes Texas Governor Rick Perry who is attempting to recharge his flagging popularity with his "own" flat tax plan.  While Gingrich still has a bigger popularity deficit than Perry to overcome, Perry's sudden enthusiasm for "bold" tax and spending plans is clearly driven by his fall from poll numbers in September of around 30-35% to his current 8-11.5%.  Indeed, all of these plans are primarily intended to generate support among Republican conservatives, Tea Party identifiers and others as well, in the nomination contest.  Because of the realities of the two party legislative process and special interest influence, none would emerge from Congress in the same form as proposed, if at all.

Nonetheless, with three such plans on the electoral table it is worth taking a look at the concept from an economic and political point of view.

Essentially, the plans are very similar in structure with the major differences being the flat tax rate proposed.  Cain’s plan stipulates a 9% individual and corporate rate:  Gingrich’s plan has an individual “flat” rate of 15% “or less” and a corporate rate of 12.5%:  Perry proposes an individual and corporate rate of 20%. The current maximum corporate rate is 35%.

The differences in impact on federal revenues, individual and corporate tax obligations and benefits will require a detailed analysis by a credible financial institution similar to  the Office of Management and Budget (OMB) which doesn’t look at campaign proposals but would analyze any similar legislative proposal.  What is clear however is that Cain’s plan for income taxes taken alone, would benefit individual and corporate tax payers more than Gingrich’s or Perry’s simply based on the lower rate.  All three would eliminate the estate tax, the capital gains tax, and the taxes on dividends.  In political terms, liberals thus claim that flat taxes provide disproportionate benefits to corporations and wealthy individuals, the implication being that this is “unfair” to middle and lower class tax payers.

The important differences in the plans start with Cain’s third “9”.  This is revenue enhancement by imposition of a national sales tax of 9% which, according to Cain allows the otherwise unrealistically low tax rates of 9%.  A second difference is that of allowable deductions.  The tax simplification part of all three plans is based more on the removal of the vast number of so called “tax expenditures”, or allowable deductions which complicate the tax code and are seen by critics to primarily benefit corporations and the “rich” . All three would continue to allow business deductions for capital expenditures, and Gingrich and Perry would allow the standard deduction for individuals of $10-12,000 and $12,500 respectively. Mixed in with these politically inspired tax breaks however are a couple of additional “sacred cows” which the politically sensitive Gingrich and Perry have stepped around.  Both would allow the current mortgage interest deduction on primary residences as well as the deduction for charitable contributions.  Cain’s plan would allow the charitable deductions but is silent on the mortgage interest deduction which in the context of today’s housing crisis has become even more like the free wandering bovines of Calcutta.

Thus the major criticism of the three flat tax plans will be that at the outset they would all create major federal revenue shortfalls and thus continue to increase annual deficits and the cumulative federal debt.  Cain will point to his national sales tax as the remedy for this but a new sales tax on top of the average state sales taxes of 9.6%, (although much lower in many states), will be condemned as “regressive” by liberals and send shudders through the “any new tax” averse conservatives.  In any case, all three rely on hypothetical levels of economic growth generated by the plans to make up federal revenues and provide new jobs.

One of the major appeals of any “flat tax” scheme is that is simplifies the complex tax code which employs a whole industry of tax lawyers and accountants and which all three flat tax candidates claim costs about $435 billion a year in preparation, litigation and enforcement.  But both Gingrich and Perry, hoping to deflect the inevitable criticism from tax code deduction losers and class warriors, have made their flat tax codes “optional”; that is, tax payers, both individual and corporate could choose to compute their taxes based on the new flat tax model or the old, existing model with its progressive rates and deductions.  This is clearly a political dodge and campaign tactic which undermines the “simplification” argument, costs, incentives for economic growth, and any “reform” arguments related to deductions. 

For any of these plans to survive analysis they would have to be combined with major spending cuts.  All three candidates support such cuts in general with talk about balanced budgets, entitlement reform and spending caps and even eliminating whole cabinet departments but cuts in specific programs, which all have organized interests ready to defend them and voters to be angered,  have not been identified. 

All three candidates have claimed that their plans, which include the aforementioned major cuts in federal spending, would eventually balance the budget.  Politically, this has great appeal to the conservative primary electorate and many in the nation-wide independent cohort, but flat tax reform plans themselves are clearly an exercise in primary campaigning.  It's the "I have ideas.  I understand economics.  I'm a leader." strategy.  Politically, such reforms have minimum medium term futures.  Gingrich’s and Perry’s “either or” tax code makes little sense, would be impossible to analyze and project, and Cain’s required flat tax would result in major resistance from the myriad of special interests who benefit from their deductions, as well as consumers who get around to calculating the cost of living with a 9% add on federal sales tax. 

Cain refutes the implications of this by saying that the sales tax is not an “add on” because the “embedded” corporate taxes in the cost of products will be reduced by the lower corporate income tax which implies the base product cost to the consumer will be reduced as well.  That is not likely to happen as the cost of finished products will continue to be primarily based on the cost of raw materials, labor, equipment, transportation, distribution and marketing.  Additionally, the fear of “rate creep” once a national sales tax is established and politicians find a new revenue source, is a concern on both the Left and the Right.

So what will be the impact of these proposed “reforms” on the Republican primary?  All three plans contain elements that make sense, especially when combined with their associated budget balancing and spending cuts, but whether the Republican primary electorate has the patience or interest to understand them and make them priorities in their choice of candidates is not certain.  Nonetheless, the short term, pre-substantive, analysis has already been felt in Herman Cain’s surge.  Governor Perry is clearly attempting to jump start his campaign by gaining back his appeal to conservatives, and like Cain, will probably see some sort of bounce in the polls just from the media attention if nothing else.

 The sustainability of any Perry bounce and Cain’s surge however is in question.  Cain has come under attack for seemingly wandering slightly away from anti-abortion purism and a joke about electrifying the border fence with Mexico.  Recently in Iowa, Perry and Bachmann and Cain were all still focusing on their personal religiosity and opposition to abortion and gay marriage, issues on which the president has little practical influence and ones far a field from flat tax considerations. Perry has been criticized as politically inept and "unpresidential" in the debates which led to his fall from grace, but has apparently sought to get far Right attention by his recent flippant reintroduction of the issue of President Obama’s birth certificate.  The fact that such issues are still crowding the public discourse and the debates, reflect a lack of seriousness on the part of voters and the tendency for policy positions to be secondary in importance to issues of style, personality, ideological conformity and substance.

Meanwhile, while Perry, Gingrich, Paul and Bachmann compete for the evangelical and Tea Party vote in Iowa,  Mitt Romney remains the front runner in New Hampshire by a wide margin.  His strategy so far has been to campaign against Obama and for the votes of the more moderate national electorate and let the more conservative candidates fight against each other and divide that vote.  Romney has introduced his own 59 point economic plan which is focused on national economic growth to produce jobs.  He offers a lower corporate tax rate of 25% and lower individual rates over time.  He also proposes eliminating the capital gains tax, which is an incentive for investment, but unlike the three flat tax candidates he would only exempt investors who earn $200,000 or less per year.  He would also cap federal spending at 20% of GDP from its current 26%.

 Cain still lacks a credible campaign organization.  Perry still must climb out of near single digit approval where he is joined by Gingrich.  Flat tax fever may help but fevers subside and 80 percent of likely Republican voters say it’s too early to make up their minds.





Sunday, October 16, 2011

RAISING CAIN

Once again there is a new "front runner", sort of, in some polls,  for the Republican presidential nomination.  In the last couple of months the fortunes of the Republican candidates and potential candidates have mimicked the stock market’s boom and bust cycles.  In a contest with too many candidates, the "leaders" usually have had approval ratings in the high twenties so it is difficult to assess what one's genuine support will be as the fringe candidates drop out.  The "maybe I'll run", non-candidate Donald Trump had 28% support in April but just 8% in May.  Then there was the Bachmann boomlet in early August when she won the Iowa Straw Poll and seemed destined to win the first in the nation and over important Iowa Caucuses in January.  But later on in that same month Texas Governor and new conservative hope Rick Perry entered the race and immediately jumped to 27% approval, stealing most of his support from Bachmann, now at 5%, and edging out front runner Mitt Romney in one poll  (Rasmussen) by 12 points.  But in the televised debates Perry has appeared clueless and unprepared and has gotten himself in trouble with conservative purists over illegal immigration and his failed attempt to require pre-teen school girls to be inoculated against a sexually transmitted disease.  So the conservative leadership banner has been handed off to Herman Cain who now leads Romney 27% to 23% in one poll (NBC/WSJ) and ties him at 29% in another (Rasmussen).  Almost all of Cain's new support comes at the expense of Perry who has dropped into the 9-14% range. 

This poses significant questions as the far right runs out of credible candidates (Gingrich, Paul and Santorum all remain in single digits).   Is this just the latest in an "anybody but Romney" dynamic in a more conservative than usual Republican electorate?  If not, then the presumption will be that Cain and/or his "9-9-9" economic program have genuine appeal. 

Certainly Herman Cain has significant personal appeal.  His background as a successful business executive and President of the St. Louis Federal Reserve Bank is impressive but in a electoral world dominated by interviews and debates his straight talk and confident style probably represent his major appeal. Now however, as happened to the other "frontrunners", much attention will be paid to "what" he is saying as well as  how he is saying it.

What Herman Cain is saying, over and over, is that he has a "bold plan" to restart the economy and cut unemployment.  Unlike the rest of the field who talk in general terms about cutting taxes and spending, Cain's plan not only has a name, "9-9-9" but contains specific details.  The basics include tossing out the existing federal tax code and  establishing a single bracket of 9% on personal income and business income.  This would represent a dramatic reduction across the board from the current brackets which start at 10% and climb through six brackets to 35% .  Capital gains taxes, inheritance taxes and taxes on dividends would also be eliminated. Cain would make up some of the loss in federal revenue by eliminating all tax deductions. He would make up the rest by establishing a national sales tax, also at 9%.  Payroll taxes which fund Social Security and Medicare currently at 15% would also be reduced to 9%.

Political candidates tend to shy away from specifics because they invite criticism from competing political candidates and groups most directly affected, and this proposal will be no different. Removing such things as the mortgage interest deduction, the oil depletion allowance (depreciation for oil wells) and deductions for charitable giving will generate much opposition. Ideologically based criticism is also certain and indeed has already started since Cain has surged in the polls.

Naturally, the first question about 9-9-9 is "Is it a good idea?"  The first and second "9s" are a flat tax with no deductions for individuals and businesses.  This is not a new idea but has definite appeal. It would simplify the ridiculously complex tax code and ensure that most of the 47-49% of tax filers who currently pay no federal income tax pay at least something  As a significant  cut for those who do pay taxes and businesses, it would put large sums of money into the economy instead of the government and thus stimulate economic growth and job creation.

The third "9" will continue to generate the most opposition.  Cain realizes that the federal debt and deficit numbers are so huge that stimulating expansion and spending cuts alone, can never achieve meaningful reductions. Thus he has proposed a broad based national sales tax.  Other conservatives believe all taxes represent a transfer of wealth to the government and depress economic growth.  They also fear that future Congresses seeking ever more revenue would raise the sales tax rate as has been done in the European Union.

Liberals who generally like high taxes prefer both a progressive personal income tax with the "wealthy" paying a higher percentage of their income and a high corporate tax.  They view sales taxes as "regressive" because when applied to basic needs like food, medicine, rent and transportation, the tax takes a larger share of total income from low income families.

So overall, is it a good plan?  Cain's economic adviser claims that the plan would:  1.  add two trillion to the Gross Domestic Product  2. create 6 million jobs  3. increase business investment by 33%  4. raise wages by 10%  5.  raise  federal revenues by 10%.  These are lofty claims and it is fair to assume that they are overly optimistic.  Still, the plan has some support among conservative leaning economists like Art Laffer of "supply side" economics fame, and Republican Congressman Paul Ryan.  A true analysis will require more time and probably more details but the political debate won't wait.

There is also another political consideration.  The plan could only be approved by a Republican majority in the House and a filibuster proof 60 vote Republican majority in the Senate which is highly unlikely in 2012.  That being the case what does it say about Cain's candidacy.  If his economic plan can't be passed, what other appeal does he have?  He is undeniably very intelligent but he has no experience in elected office and has no background in social or foreign policy.  Future debates on these subjects could broaden his appeal or see him join the crowd of "also rans" who experienced short periods of enthusiasm before falling into the single digit approval wasteland.

Thursday, October 6, 2011

FUN IN THE PARK: ZOMBIES AGAINST GREED

The political environment in the country is pretty crazy as doubts about the economy escalate, the related financial crisis in Europe adds to the gloom  and the stock market seems to be riding Superman's trampoline.  In the campaign arena, the Liberal establishment is frantically trying to destroy the presidential prospects of Rick Perry with irrelevant charges about capital punishment in Texas and now a rock with a racially provocative word (long since painted out) that was found at a hunting camp Perry had used.   All this, even while Perry's own missteps are dragging him down in the polls, a circumstance which primarily benefits the more moderate Mitt Romney who Democrats fear more than Perry.

But the Left seems to be going from "dumb to dumber".  A Twitter and FaceBook  inspired protest movement which calls itself "Occupy Wall Street" has appeared in New York City and is currently camped out in Manhattan's Zuccotti Park.  It remains unclear exactly what the movement's goals are and even the self appointed organizers and participants don't seem to know. The New York Times quoted a "pep talk" given to a new protestor; "It doesn't matter what you're protesting; just protest." 

What it is so far is a mostly 20-something sit-in, sleep in, march and holler, carnival complete with balloons, costumes, music and the favored simple minded slogans covering the usual wide spectrum of Left wing causes and complaints.  The Washington Post reports "women in brightly colored wigs playing with hula hoops". Others were encouraged to paint their faces white to portray "corporate zombies and eat Monopoly money.  But mixing songs and silly behavior with self-important outrage can be fun, certainly more fun than educating oneself on the issues and voting. Wiljago Cook (yes, that's her name) quit her job in Oakland, California to come to New York and block other people from getting to their jobs on Wall Street . . . to protest unemployment.  This convoluted thinking seems to support protest organizer David Graeber's acknowledgement that outside opinion sees the protest as ". . . a bunch of kids who don't know economics and only know what they're against.  But Wiljago's logic challenged reasoning, the hula hoopers and those folks seeking their "inner zombie" makes even Graeber's broader strategy seem disconnected from reality:  "So we're trying to reform things away from the rhetoric of demands to a question of visions and solutions."

One "vision" on the protest web site says the goal is to "attract twenty thousand supporters to set up beds, kitchens and 'peaceful barricades' in order to 'occupy Wall Street' for a few months in an effort to end corporate greed."  How keeping thousands of traders, secretaries and janitors from going to work  would end "corporate greed" i.e. profits, they haven't said and certainly don't know.

But it's the nature of Left wing, post-adolescent protestors to think "big", as the presence of the young self styled Marxists and anarchists, and the "Abolish Capitalism" signs attest.  So far, however, the "movement" is a few thousand people short of the twenty thousand people goal with a "few hundred core supporters" camped out in the park and an estimated 2000 locals joining in the fun when the "movement" starts to "move", as in march.  Following the usual evolution of public mob protests, the dominant issue has now become the charge of "police brutality", as "New York's Finest" struggle to keep the public thoroughfares open and the protestors go happily into "victim" mode. But the prospect of twenty thousand people sleeping in a park without food, water or sanitary facilities “for a few months” is absurd on its face.  Setting up "peaceful barricades", an oxymoron, to shut down the most important street in the world and deny thousands of people access to their jobs is a simple minded invitation for the "mother of all" police confrontations.  But of course, they do it in Greece, so. . .?

The protest's lack of focus, and thus seriousness, has been criticized even from some on the Left and is apparent in the signs complaining about everything from "global warming" to capital punishment, as do the "demands" listed on the web site.   The demands are nothing more than a list of complaints against "them"/"they", the sinister, faceless, Wall Street millionaires who are allegedly and single handedly responsible for all the nation's woes.  Most of these indictments are without merit and without benefit of specific or thoughtful policy proposals.  "Foreclosures"; "gender, race and "gender identity" discrimination"; "poisoned food supply"(?) and "undermined farming"(?);  "They", "used the military and police to prevent freedom of the press"; "accepted contracts to murder prisoners"; and "create weapons of mass destruction".  No social ill, alleged victimization, or cliche'd Left wing charge is left out.

The “movement” can be further characterized by its supporters and cheerleaders.  The usual group of Left wing celebrities have appeared to urge them on.  Susan Sarandon, who always seems to be around these things; black radical Princeton professor Cornell West and actor Alex Baldwin have chimed in, and of course those anti-capitalist, capitalists, Michael Moore and George Soros have offered their “support”. Van Jones, the defrocked former Obama "green jobs czar" who "resigned" after his association with a Marxist group in San Francisco became known, is starting a sister protest group.

What does all this mean?  It’s largely in the eye of the Left wing beholder.  “Solidarity” protests have sprung up in a few other large cities and some liberal commentators have tried to make the case that Occupy Wall Street is the beginning of a significant “revolutionary” movement  that will be the Left’s answer to the Tea Party movement on the Right.  The problem with such forecasts is that the Tea Party has a focused and specific, actionable agenda:  lower taxes, cut spending to reduce the deficit and federal debt and reduce the size and scope of government, and it appeals to a broad range of Americans.  It's strategy does not include "peaceful barriers" and instead focuses on elections.

The complaints and implied solutions to the issues raised by the far Left are higher taxes; “income redistribution”; more government spending, bigger more intrusive government i.e. an enhanced regulatory state, and more social engineering.  In short, it is close to an advocacy of socialism which is specifically evident on the signs carried by some of the protestors.  As such it will at best generate a lot of noise, confrontation, and over analysis by the media but in relative terms, little support from middle class Americans who can't take "a few months" off to live in a park and disrupt traffic.  

All the political “signs”, from chicken entrails, Tarot cards, astrological movements to political polls and punditry, indicate a continuation of the 2010 conservative electoral surge in the 2012 elections.  The Left are beside themselves, frantically striking out at conservatives, fighting among themselves and busily looking for some tactic or strategy to save Obama and themselves.  This opens the door to fringe dwellers and extremists.  Occupy Wall Street is just the latest manifestation of this tendency.  What is likely to happen in the short term is that the more organized, more self serving, issue specific groups on the Left that are now joining or supporting the disorganized Occupy Wall Street protest, will in effect take over the movement and the headlines.  Labor unions and advocacy groups like MoveOn.org will "move in" and as the energy and "fun" of the youthful protest becomes less a part of the movement the political confrontation between conservatives and liberals will return to the usual playing fields of blogs, media and electoral politics.  Occupy Wall Street should disappear soon after the first snow falls on Ziccotti Park.

Thursday, September 29, 2011

2012: A STARTING POINT

Politics harbors much "conventional wisdom" and a small sample contains variations of the thought that " fourteen months (more or less) is a lifetime in presidential politics".  This is especially true if the fourteen months occur just prior to the first votes being counted.  However, in spite of the "anything can happen" truth during the period in question, outcomes are framed within a context of a factual starting point; not a fixed point but a moving  trend. 

The Gallup Poll has recently (9-22) found that 44% of Democrats are less enthusiastic about voting in the 2012 presidential election than in previous presidential elections.  This enthusiasm plunge, from a figure of just 15% in 2008, which evokes images of Mexican cliff divers, is made more stark by the flip side of the poll that showed 58% of Republican voters are more enthusiastic about voting in the next presidential election than the previous (2008) event.

One can hardly blame the Democrats for their funk. The possible reasons for their “malaise” are numerous and make the context of the evolving campaign more clear.  President Obama’s job approval is down to 39% with 51% disapproval. Approval amongst core groups is also in decline.  Approval among Jewish voters, small in number but concentrated in important electoral college states, is down from 83% in 2009 to just 54% currently.  The Gallup measure of “economic confidence” is currently minus 52 out of a possible positive 100.  The more general “state of the nation” index is just positive, 11% and negative 88%.  In spite of two and a half years of “Bush did it” by Obama and Democrat politicians and media sympathizers, a majority (53%) now blame Obama for the state of the U.S. economy with 56% saying Obama is the same or worse than Bush.  Among the all important Independent voters, 67% make the same judgment. 

As the seemingly endless supply of Democratic “strategists” populating cable talk shows reach for their Prozac, it just gets worse.  A September 22 Gallup poll of registered voters finds that while 54% of those polled would “definitely or might consider” voting for Obama in 2012, 45% would “definitely not” consider voting for him.  At the same time 62% said they would “definitely or consider” voting for Mitt Romney with only 35% in the negative category.  Rick Perry comes in virtually tied with Obama at 53% for and 44% against.  This is a dangerous statistic for Obama since neither Romney or Perry is the Republican candidate as yet and being tied or behind both of the top two possible candidates of the opposing party is a terrible place to be so early in the campaign.

Poll numbers from vital “swing states, Ohio and Pennsylvania are equally threatening.  A recent Quinnipac University poll finds that in Ohio 51% of voters specifically believe that Obama “doesn’t deserve reelection” including 53% of Independents.  In Pennsylvania the numbers are 51% to 44% against reelection with Independents registering 49% to 44% against.

In the wider context of issues of some importance to the voting public, immigration continues to simmer in the background as shown by Rick Perry’s struggle to define and then redefine his opposition to a border fence and support for tuition breaks for illegal immigrant students.  Obama and the Democrats continue to avoid the issue but are solidly in the liberalized enforcement camp opposed by a majority of Americans.  A federal judge in Alabama recently upheld most of the provisions of a tough Alabama law dealing with illegal immigrants which the Obama Justice Department will almost certainly appeal, thus reemphasizing it as a campaign issue.

The Affordable Health Care Act (“Obamacare”) has also regained prominence as an election issue.  Federal District Courts and Circuit Courts of Appeal have issued contradictory opinions regarding the constitutionality of the most import part of the law which requires all citizens to buy health insurance or pay a penalty.  The Justice Department has asked the Supreme Court to decide the case without further appeals to the Circuit Courts.  This is the Obama Administration’s signature legislative achievement to which he devoted the first eighteen months of his time in office.  It will now be a high visibility issue in the presidential campaign and with no less than 56 % of the population wanting the Congress to repeal it, even mentioning it, much less campaigning on it as a success will be difficult.

Nothing else seems to be going well for Obama.  Federal Reserve policy and the financial crisis in the European Union keep the stock market gyrating with enormous swings almost on a weekly basis which emphasize the uncertainty and instability of the economy.  The “promise” of the “Arab Spring” with its overthrow of dictators has so far produced political instability in each nation, the possibility of Islamist governments and a deterioration of the Israeli/Palestinian conflict.  Obama has managed to alienate himself from the Israeli government and will shortly alienate himself from Arab governments with a U.S. veto of Palestinian statehood in the UN Security Council.  Violence is on the upswing in Pakistan, Afghanistan and Iraq even as U.S. forces begin withdrawal.

Certainly not all of this is in the control of Obama or any other President but taken all together, along with U.S. unemployment seemingly fixed at 9%, the impression more and more voters are getting is one of a President out of his depth and an Administration in disarray. 

What does all this mean?  Essentially, it is the task of the Republican candidates to project an image of capability and confidence and contrast it with the fits, starts and failures of the Obama Administration.  Once the Republican candidate becomes obvious, Republican voters must rally behind whoever it is and present a unified front in spite of their differences and preferences.  It will then be up to the candidate to perform well in the presidential debates, something Republican primary voters should keep in mind.   Candidate Reagan’s question to voters during his debate with President Carter is even more powerful today:  “Are you better off today than you were four  years ago?”
How many could say yes?  Still, the powers of incumbency are significant; the Obama campaign will have close to a billion dollars to spend, and the far Left organizers, media and special interest groups who control the Democratic Party will be in desperation mode. But if current trends continue it will be the Republican voter's and the selected candidate’s election to lose.

Tuesday, September 20, 2011

PALIN IN COWBOY BOOTS?

September is quickly winding down and not surprisingly nothing has been heard from the ex-Alaskan governess about jumping into the Republican presidential nomination race.  This is not surprising because she has never taken the usual organizational steps required for raising money and operating a multi-state campaign.  It is also not surprising because she has never followed the advice of Republican strategists since her defeat as McCain's tag-a-long in the 2008 presidential campaign which was to go home and attempt to achieve some breadth and depth in the basic economics, national politics and international relations areas.  Instead she chose the paid celebrity route with substance free books about herself, highly paid speaking engagements, a Fox News "contributor" contract, and a self-promoting biographical movie.  Of course she could still "jump", or fall, into the race just to keep her name in the news but it seems unlikely given the rise, fall, and continued presence of her evangelical and ideological twin, Michele Bachmann. 

Still, in a sense she might be already in the contest, at least in spirit, and not in the form of the Representative from Minnesota.  The current front runner in the polls is Rick Perry who is appearing more and more to be Palin in cowboy boots.  In a few short weeks he has managed to change his image from a tough talking, get things done, jobs creator to a substance challenged Palin-like, anti-government cheerleader.

Consider the other image making (or breaking) similarities.  Both are from states with a vigorous "frontier" image and culture of independence.  Both seek to bolster this image with strong firearms advocacy; she shoots wolves from helicopters; he shoots coyotes from jogging shorts.  Both celebrate the rejection of the last two hundred years of biological and geological science by affirming their belief in creationism and their desire for God to take over the tough decisions and fix the economy.  Both display a disdain for intellectual breadth and academic success.  She took five years at four different colleges to earn a degree in sports journalism.  He brags about being "in the top ten of his high school graduating class of thirteen” and flunking college chemistry in a failed attempt to become a veterinarian; instead settling for a degree in animal husbandry.  Despite a high volume of political rhetoric, neither have offered much in the way of policy preferences, instead just contributing to the anti-Washington, anti-Obama windstorm which seems to appeal to large conservative crowds. This stance of course makes both favorites in the Tea Party wing of the Republican Party. 

There are important differences in the two, however, to those Republicans who can look past the nomination battle to the general election and are hopeful of replacing Obama in 2012 the similarities can be scary. 

Perry has the advantage of being a politically successful governor of the second biggest state (behind Alaska but with thirty-six times its population).  He has held that position for over ten years and never lost an election.  She was elected with less than a majority vote in a multi-party election and resigned after two years for the money and bright lights of the lower forty-eight states.  He served on active duty as an Air Force pilot and presumably knows something about the military.  She spent three days visiting troops in Kuwait and Iraq.

It is becoming clear that many in the Republican establishment (big donors, members of Congress, state officials) have serious doubts that Perry could win the general election although he might well win the nomination on the strength of his Tea Party and evangelical support.  Just as “the stars were aligned” to elect a remarkably unqualified and unprepared Democrat in 2008, the political/economic environment seems to be creating a strong possibility to unseat him.  This might be the Republican party’s election to lose and the critical constituency which the Republican candidate must win back from Obama are Independents who play no role in the selection of the nominee.  (Some primaries are “open” and allow anyone to vote in them but most are not).

So far Perry has done little to attract these voters.  His rash statements about Social Security, constant references to his fundamentalist religious views, and abortion, were/are unnecessary and divisive.  Perry still has plenty of time to change his image but so far has shown little inclination to abandon his harsh tone and anti- everything Washington views.  With the economy being the central election issue, a few credible policy ideas along with an upbeat vision of the nation’s future under his leadership would help him immensely with voters who are disillusioned  with Obama but wary of ideological rigidity and partisan gridlock. 

If Perry is to be successful in convincing general election voters that he has better ideas and leadership skills than Mitt Romney and Obama,  he has to abandon the Palin like superficiality and attract voters in the swing states of the mid-west.   Iowa, Texas and the South will not be enough.  Of course the whole problem disappears if Mitt Romney can convince primary voters that he can defeat Obama and Perry can’t, or simply that his more moderate views and business success make him better qualified for the office.