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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.