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Tuesday, August 23, 2011

PERRY: FICTION; REALITY; QUESTIONS

Since Texas Governor Rick Perry announced his candidacy for president on August 13th the effect has been like the ripples generated by  a giant rock tossed into the electoral pond.   The liberal media and the Obama White House have lashed out in a collective fit of personal attacks and statistical "interpretation" of the Texas economy all of which portrays a real fear of Perry's candidacy.  This is in spite of suggestions that they would prefer to run against Perry who is easier to demonize and denigrate than the more moderate, sophisticated and reserved Mitt Romney. 

The political Left can pick their poison to keep spreading around from the bloggers, pundits and administration "sources".  Accordingly, Governor Perry is:
"a thug"; has demonstrated "breathtaking cruelty" and "cold hardheartedness"; includes "no compassion to his conservatism"; has a "lack of mercy"; and would be "armed and dangerous".

So what explains this outpouring of hate after just two weeks and a half dozen speeches in three states?  The simple truth is that Perry is a true conservative, has identified with the basic platform of the Tea Party and has energized a sizable cohort of the Republican base which has vaulted him to a lead in the latest national poll of Republican voters.  The Rasmussen poll taken after the Iowa "straw poll" in which Perry did not participate but still received write-in votes, has Perry ahead of the pack with 29%.  Former front runner Mitt Romney comes in second at 18% and the winner of the much exaggerated straw poll, Michele Bachmann is a lowly 13%.  Perry has essentially taken her out of the public eye and replaced her as the Tea Party and evangelical candidate.

 Even more remarkable is the August 22 Gallup poll of presidential preferences among all voters which shows Perry tied with President Obama at 47% each.  In that same poll, Mitt Romney  leads Obama in that poll 48% to 46%.  For an incumbent president to be tied or behind two possible opposing candidates thirteen months before the election explains a great deal about the hard core Left's hostility infused dilemma.  It also presents a tactical problem for the Obama campaign by requiring a choice on where to spend their money in the coming months.  Attacking both Romney and Perry will be expensive and split their resources but they can't afford to gamble and pick a winner for the nomination this early.

Of course the fact that it is early in the Republican campaign means that it is possible that one of the Republican candidates could falter and simplify  both the Obama camp's strategy and the Republican voters choice.  With this in mind it is useful to begin a less emotional analysis of the Perry candidacy.

Perry for the most part is a "what you see is what you get" politician.  He says what is on his mind and doesn't seem concerned with controversy or negative reaction, and by the usual standards of national campaigns he has already tested these waters.  His foolish and over the top comment about Federal Reserve Chairman Ben Bernanke being "almost treasonous" if he printed more money to stimulate the economy and how if in Texas, Bernanke would be "treated pretty ugly" is the example most cited by both the Left and the Republican establishment.  With the Left attempting to portray him as an extremist loose cannon, Perry will have to show more self discipline.   Nonsensical statements aside, he so far has chosen to run on his record which he equates with the record of the Texas economy since the recession began in 2009. 

Despite the "analysis" of liberal critics about the nature of jobs created in Texas, Perry got a boost from the head of the Federal Reserve Bank of Dallas, Richard Fisher who is a Democrat.  Fisher said recently that: "over the past two years Texas has accounted for 49.9% of net new jobs created in the United States and these are not low paying jobs."  Democrats claim the jobs growth is because of the oil and gas boom and point to Texas's high unemployment rate of @8.2%.  Further analysis however shows that the unemployment rate is kept high in spite of job creation by the huge influx of job seeking workers from other states as well as from cross border immigration. The population of Texas has indeed grown by 21% over the last ten years.

Thus the issue of Texas economic growth and jobs creation is not really about whether it happened but about whether Governor Perry had much to do with it.  Of course the “on his watch” cliche’ does apply in politics, for both good and bad circumstances so he will get some credit for the relative economic health of Texas. However, the fact is that on both the national and state levels, private enterprise creates jobs in response to market demands not government.  What government can do, and what Perry says he and the Texas legislature have done, is create an environment that encourages private enterprise to make the investments necessary for job creation and this is his formula for the national recovery.  Essentially it is lower taxes, lower government regulation and lower spending.  This strategy is of course criticized by the Left as "tax breaks for the rich"; a license for "big corporations to steal and pollute"; and "balancing the budget on the backs of the poor."  The choices are being made now in the U.S. Congress and will continue to be made in the 2012 election.

Perry is not an anti-government Libertarian like fellow Texan Ron Paul.  He is a federalist who supports a robust role for government at the state level which would allow for significant differences in taxes, regulation and social policies like gun control, gay marriage, and medical marijuana laws.  This belief in state government is apparent in two failed policies he initiated in Texas.  One was an executive order for all Texas's female fifth graders to be inoculated against a common sexually transmitted virus which has been associated with cervical cancer in adult women.  The Texas legislature revolted against this initiative as a major intrusion and over reach of government.  Perry's plan for a multi-billion dollar “Trans Texas "Corridor" or cross state highway system to facilitate the transportation and marketing of goods associated with the North American Free Trade Agreement with Mexico was also rejected by the legislature.

So at this point the debate over Perry will take place on two levels; the contest for the Republican nomination and the 2012 election versus Obama.   With respect to the nomination, Perry has established his bona fides as a staunch conservative, small federal government social conservative.  Poll data shows that this philosophy combined with his ten plus years of executive experience has been successful among the Republican base which plays a major role in the nomination process.  With respect to more moderate, less ideologically rigid and less socially conservative voters in places like New Hampshire and non-Southern states Perry has a bigger problem.  These voters will be looking at his electability in the national election where the independent voters become the “swing voters” who decide close elections.  With this group Perry has some work to do.  Democrats have, and will continue to, portray him as another bible thumping, Texan red neck boob.  Indeed the “swagger”, the “drawl”, the cowboy boots and the inclination to “shoot from the lip” are all there. The veracity of the underlying claims remains to be seen.  On other issues, some of which are important and some less so but still controversial, he supports the far Right positions. He does not believe in the human contribution to global warming although much scientific data supports at least some role for man made pollution.  He does not believe in the “theory of evolution” in spite of the overwhelming evidence available and universal acceptance in the scientific community, and he mistakenly told a young boy in New Hampshire that Texas "teaches" both Creationism and evolution in their schools. 
On immigration however, he has a more liberal attitude than the “close the border, no amnesty” Right Wing.  He supported and signed a Texas version of the failed federal “Dream Act” which allows in state tuition at Texas colleges for “undocumented aliens”.  This seems like a politically motivated position in a state whose population is 37.6% Hispanic including roughly 1.5 million illegals. 

Perry’s “national prayer meeting” in Houston entitled “The Response” just one week before he announced his candidacy was probably a successful introduction of Perry to the 40-45 percent of Republicans who identify themselves as evangelicals but it raised some concerns among religious moderates, secular independents and members of non-Christian faiths with respect to Perry’s commitment to the commonly accepted interpretation of the Constitution’s First Amendment requirement for “separation of church and state”.  At the meeting, talking about the economic crisis in the U.S., Perry said: “. . . it’s time to hand it over to God and say God, you’re going to have to fix this.” The problem with this exhortation is that presumably as President, Perry believes he would assume the role of God’s agent and interpreter since if God was going to fix the economy on his own there would be no need for Perry to run for the presidency. Such self elevation if genuine has a troubling history.

Thus at this point Perry is far from the ideal Republican candidate with a significant chance to take advantage of Obama’s low job approval.  If he overplays his far Right credentials in the primary battle he could lose the nomination but even if he wins, he could alienate the moderate and independent vote in the general election.  At some point he will have to move to the Center to be successful in both endeavors.  Mitt Romney is still the front runner in some polls and has portrayed himself as a conservative leaning moderate with a successful background in the financial world.  He will have to become more energized and more policy specific to counter the Perry surge, which he is almost certain to try to do.  To the non-evangelical, non-Southern voters he currently appears to be more sophisticated and knowledgeable, less volatile, and perhaps “more presidential” than the rigid and sometimes simplistic “cut and shoot” Texan.  Perry can change some of that but whether he will remains to be seen. Romney's problem is that he doesn't seem genuine and is uncomfortable having to reject his more liberal positions as governor of liberal Massachesetts to attract votes in the conservative dominated Republican primary system. But despite any particular flaws both candidates may still be able to demonstrate that they would still be better for the nation than four more years of Obama.  In any case the future Republican debates should be more interesting than the previous two.



    

Saturday, August 13, 2011

IOWA: TOO LITTLE, TOO SOON

It was more like another version of American Idol than an important political debate. The pundits were ready to predict and the audience was ready to vote.  Bret Baier of Fox News who hosted the show even said the next day that the candidates were looking for a "sound bite" that would be remembered afterwards.  There isn't any way to have a "debate" with eight participants.  The average talking time for each participant was somewhere just short of ten minutes.  Of course there was little new ground covered anyway.  The candidates knew what the questions would be in general and gave prepared answers even if they didn't quite fit.  All hewed to the Tea Party line except John Huntsman who differed on the issue of the extension of the debt limit. The rest stuck with "no new taxes" (as did Huntsman) and more cuts in spending. 

Still, for those who were looking for sound bites there were a few.  Herman Cain complained that "Americans need to learn how to take a joke" when asked about his suggestion to fix the southern border; "build a ten foot high electrified fence".  Hmmm, sounds less expensive and more effective than the one their building.  But it has to be a joke, at least now if not when he said it because PETA would be agonizing about fried coyotes and open borders advocates who can't make the distinction between fences that keep people in and fences that keep people out would be calling it a violation of human rights.   Newt Gingrich got an enthusiastic response from the crowd when he called Chris Wallace's question about his staff resigning a "Mickey Mouse"  "gotcha" question.  Newt has done enough things in the past to make him a marginal candidate but he was right on this one.  Poll leader Mitch Romney said he wasn't going to "eat Obama's dog food".  This interesting metaphor can be interpreted anyway one wants but the imagery is a bit questionable.  Struggling candidate Tim Pawlenty offered to mow anyone's lawn that could identify President Obama's plan for fixing the economy and Michele Bachmann told us for the thousandth time that she is qualified to be commander-in-chief because she raised five kids and twenty-three foster kids.

So there you have it; humorless Americans, Mickey Mouse, Obama's dog food, the Brady Bunch card and politically induced lawn mowing.  In retrospect, probably not the sound bites the candidates hoped the electorate would remember them for. 

Some serious topics were raised but the fringe candidates hung on to their fringe status and the candidates that have a chance were predictable in their responses.  Pawlenty focused most of his time on attacking fellow Minnesotan Michele Bachman for her lack of achievements and qualifications.  He was right of course but Bachmann's supporters are undeterred because she tells them what they already believe and as she mentioned in her retort to Pawlenty, she was the author of the all important Light Bulb Freedom of Choice Act.    John Huntsman ("John who? He's polling at 2.3% percent) seemed uncomfortable, unassertive and "unpresidential".  Herman Cain always has an answer but somehow just doesn't seem credible.  Rick Santorum can't let go of his moralizing intolerance on social issues and Ron Paul?  Well he attracts a lot of support among anti-government purists but in spite of some good small government ideas he mostly lives in the simplistic parallel universe of libertarianism.  When the subject of Iran came up Paul's suggestion for our foreign policy was "They are not a threat". and "We should just mind our own business."  Well, the fact is that Iran is the number one national supporter of Syrian dictator Assad who is currently murdering his own citizens.  Iran is also the sponsor and supporter of the terrorist anti-Israeli Lebanese armed militia Hezbollah and the terrorist anti-Israeli armed militia in Gaza, Hamas.  Iran supplies arms to the Taliban in Afghanistan and is the focus of the regional and Western European governments and the United Nations because of its nuclear weapons program.  Paul also wants to do away with the Federal Reserve which is the nation's central bank, the issuer of our currency, the supervisor of our banking system and the conductor of our monetary policy. 
 
It could easily be argued that the most intellectually and experienced qualified candidate is former Speaker of the House of Representatives, Newt Gingrich who acquitted himself effectively in the "debate".  However, because of a history of personal foibles and some verbal gaffes in the political pre-season Gingrich is polling at single digit numbers, a fact which has caused his campaign staff to seek greener pastures and has severely impaired his fund raising efforts. 

Thus the debate, with the exception of the Bachmann-Pawlenty dust-up and the Santorum-Paul disagreement on Iran, was more like a joint news conference with predictable questions and familiar talking points responses. The debate was simply part of the whole straw poll media event.  The straw poll is actually a fundraiser for the Iowa Republican party.  Participants are charged $30 to cast their opinions and as a percentage of eligible voters their numbers are quite small.  To justify it as a political exercise its supporters say it is a test of the organizational ability of the candidates, most of whom bus in their supporters, serve up food and entertainment and pay the polling fee for each.  Maybe so, but if that is what it is, the media and pundits are giving it way too much importance in terms of its election significance.  Straw poll winners often do not even go on to win the candidate selection Iowa caucuses in February and the winner of the caucuses often do not go on to win the nomination.  Still the media has already pronounced the end of the Pawlenty campaign since he did not come in first or second.  Front runner nationally, Mitt Romney is not even participating in the straw poll nor is newly announced candidate Rick Perry. 

So observers can relax and enjoy the theatrics, the over analysis and the dire predictions.  In truth the less popular candidates going into the debate and the straw poll will probably suffer campaign ending results sooner than they would have, although they will probably hang on until after the caucuses in February.  Ron Paul was predicted to do well in the straw poll and actually came in second which is a good indication of its irrelevancy.  He, like Michele Bachmann who came in first, attracted dedicated protest voters who in Paul's case know that he won't be the nominee or the president and in Bachmann's case who are in denial because she has convinced them that God wants her to be president. 

Prior to the New Hampshire primary in early 2012 the debates will get better with fewer candidates and after that primary the contest will probably be reduced in practical terms to Mitt Romney and Rick Perry and that should be really interesting.

Thursday, August 4, 2011

DEBT AND SPENDING: WHAT WAS ACCOMPLISHED?

Now that the immediate threat of a federal government "default" is over, numerous questions remain:  "Is the crisis over?"; "Have meaningful cuts in federal spending been made?" "Have vital social programs been gutted?" "Is the U.S. government finally on a path to fiscal responsibility?"

The short answers respectively are, no, no, no and no.  However, there is still a glimmer of hope and cause for unenthusiastic optimism.  First, any legislation which passes over the opposition of ideological extremes on both ends of the political spectrum, in this case the far Left and Tea Party purists, must as least represent a reasonable compromise.  This means that the democratic process in the U.S. Congress while on life support, still hasn't quite expired.  The debt ceiling extension passed in the House of Representatives by a 269 to 161 majority with 105 Democrats and 56 Republicans opposed.  In the Senate the bill passed with a 74 to 26 majority with 5 Democrats and one far Left Independent (Sanders (I-VT) and 19 Republicans opposed.

This does not mean that a state of harmony has been restored to the culture of the Congress.  House Minority Leader Nancy Pelosi warned that "Republicans are trying destroy the world as we know it" before voting in favor of the impending destruction.  Republicans associated with the Tea Party were called "terrorists", "hostage takers" and chefs in "Satan's" kitchen.  But back to the "questions" remaining.

Although delayed until 2013, the crisis is not over. The federal debt continues to grow and the debt limit will have to be raised again (and again). Republicans have warned that similar demands for spending cuts will accompany that process and Democrats have warned that "next time" they will press harder for revenue increases i.e. taxes.

Meaningful cuts in federal spending have not been made.  Certainly the initial required cuts of 917 billion dollars and the second phase requirement of an addition 1.2 to 1.5 trillion dollars are huge numbers in real terms.  BUT, the second phase cuts are to be spread out over ten years.  This means on average and at a minimum, they represent reductions in future federal spending of about 120 billion dollars a year.  Again, in real numbers this is a fairly large amount but in the context of the total annual budget, the projected annual deficit and the total and projected federal debt, they shrink into relative insignificance. 

Total spending for fiscal year 2011 is 3.82 trillion dollars.  Now no ordinary mortal, including members of Congress can fully comprehend what a trillion dollars really is but it's an enormous number. Federal revenues for 2011 are 2.17 trillion dollars thus resulting in over spending (an annual deficit) of 1.65 trillion dollars. So the average cut required by the current debt extension legislation after the initial cut, represents about  4% percent of current annual spending, only 16% of the projected 2012 deficit and only 1.5 percent of the 14.3 trillion dollar existing federal debt. 

What this all means depends on one’s ideological orientation.  Liberal Democrats obviously see it as a blow against the government’s role, which in their view is to provide subsidies to those segments of the population who are not “rich”. Conservative Republicans see it as a first, but inadequate step in reducing the size of government and thus avoiding a future state of European style insolvency while promoting economic growth by freeing up capital for investment and thus higher levels of employment.  Essentially, as the numbers cited above demonstrate, the importance of the debt ceiling/spending reduction legislation is that it might represent a turning point in the typical culture and agenda of Congress from ever increasing spending to a search for ways to bring spending more in line with revenues.  For now this turning point will only hold as long as Republicans maintain a majority in one house of Congress but the debate has certainly raised the consciousness of the American  people with respect to federal spending, deficits and debt and that insures that these issues will play an important role in the 2012 federal elections.

Reducing the federal debt as a percentage of national income (GDP) is vital.  Many conservatives hope to do this over time by the passage of a “balanced budget” amendment to the constitution.  The new legislation sets up a “super legislative committee” of twelve House and Senate members whose job it will be to find an additional 2.1 to 2.5 trillion dollars in spending reductions by November 23, 2011; Medicaid and Social Security are exempt. If such cuts are not proposed and accepted by Congress, automatic across the board cuts  totaling 2.1 trillion dollars are enacted and a vote in both houses of Congress on a balanced budget amendment to the Constitution is required.  Such a vote would not be successful in the current congress where a 2/3 majority is required in both houses and it is unlike to pass in the new congress in 2013 without another Republican sweep.  It would then have to win approval in 3/4 of the 50 state’s legislatures. Still, including this requirement in the so called automatically “triggered” response to a failure of the super committee and the Congress to find the additional spending cuts is another demonstration of the changing political orientation in the Congress.

While a requirement for an annual balanced budget would speed up the reduction in the national debt and, at its current level which is close to 100% of GDP it is extreme, most economists agree that some federal debt is manageable.  The last federal surplus occurred in fiscal year 2001 and in that year federal debt amounted to 5.8 trillion dollars or 58% of GDP and there was little controversy about it.  In fact, the 40 year average to 2010, of federal debt to GDP is 35%. 

In spite of the long and adversarial debate over this debt reduction effort and the doom and gloom predictions from the Democrats, the proposed cuts are far from adequate to make significant reductions in either predicted annual deficits or the enormous current federal debt.  All the cuts fall on to "discretionary spending" including defense. A genuine program to cut deficits/debt must include the "entitlement" category which constitutes almost 2/3 of the budget.  These items are Social Security, Medicare and Medicaid.  Liberals have made supporting these programs at their current levels a quasi-religion and reject all changes. But demographic realities can't be ignored and without changes deficits and debt will continue to escalate and the programs themselves will eventually become insolvent.  Tea Party conservatives are equally rigid with respect to taxes. Spending cuts alone cannot solve the budget problem.  The tax system needs to be reformed in any case and the President's bi-partisan commission which he established to recommend financial reform and then ignored, proposed ideas which are worth pursuing.  The commission's ideas included creating only two tax rates and lowering them from their current levels as well as  revoking most currently available deductions and loopholes.  The predicted result was a significant increase in tax revenues and a simpler tax code.  This is not a radical departure from the Tea Party position of "no new taxes" and would be an important contribution to the budget balancing effort. 

The rest of the year will be both interesting and contentious as the "super committee" does its work, the 2012 fiscal year federal budget is formulated and the issues are magnified by the politics of the 2012 election, but a workable long range debt policy will probably have to wait until the next congress and the next administration whether it is the second Obama administration or a Republican successor.