Sunday, July 15, 2012


Is Obama a socialist? In a recent commentary, Socialist Party USA Chairman Billy Wharton says, definitely not. He's correct, “if”, you compare Obama, to Wharton's party which has just about enough members to fill a high school auditorium. Socialist Party USA lives in the Nineteenth Century and its program sounds a lot like the goals of the Paris Commune during its brief existence in 1871. SPUSA wants to nationalize all industry and distribution systems and hand them over to the workers; create a non-hierarchical business model, a “democratic” “classless”, “feminist” society and provide free government services for everything. Even on his worst day Obama doesn't approach these largely imaginary goals.

Although similar socialist movements have had better success in attracting membership and even political representation, if not political power, in Europe, history and modern economies have moved on and the few surviving socialists of the old school are an ideological and theoretical fringe. The new face of socialism, often called “social democracy” in Europe, while eschewing “government ownership of the means of production”, manifests itself in policies of hyper regulation of the private sector, strong support for organized labor, redistribution of wealth through high taxes and the creation of a cradle to grave government subsidies to individuals, and the embrace of social engineering to create equality of outcomes rather than equality of opportunity. The economic crisis in the seventeen nation Euro-zone and in much of the wider twenty-eight nation European Union, which in relative terms, far exceeds the economic downturn in the U.S., offers a stark example of these economic and social policies.

The “old socialism” as an economic system, including the more common undemocratic forms in the former Soviet Union, the Peoples Republic of China, Vietnam, and which currently remains in Cuba and North Korea, has failed wherever it has been tried. In the West, it has been replaced by the “advanced welfare state”, a big government dominated system which is funded and regulated at the expense of economic growth through free markets. Using this template, Obama and his supporters in the far Left, come closer to today's “new socialism”.

Look no further than Obama's class warfare campaign rhetoric and his attack on private wealth i.e. “millionaires and billionaires”. “corporate jets”, “hedge fund managers and Wall St. bankers”. These fortunate few are viewed as somehow immoral or undemocratic for achieving significant financial success. They allegedly “don't pay their fair share” of taxes which Obama assumes to be a higher percentage of their income than they do now, which is already a higher percentage than everyone else. Of course mega-wealthy Hollywood actors and rich rap stars are exempt from these criticisms.

The publicly stated rationale for criticism of the business wealthy and his goal of raising their taxes is that “they can afford it”, which of course some of them can. But Obama wants to raise taxes on individuals who make $200,000 a year and couples who together make $250,000. Such people are certainly well off but hardly in the class of “millionaires and billionaires” and many are small to medium sized business owners. But the real reasons for the “fairness and affordability” claim is that the government needs their money to maintain high spending levels, and economic envy can be a workable campaign tactic. The new higher Obama personal income tax rate would be 36 %-39.6% In addition Obama's tax proposals call for an increase in the tax on corporate dividends paid to investors from the current 15% to as high a 44.8% depending on income thresholds.

Obama's and the Left's support of a lower threshold (3.5 million) and high tax rate (45%) on estates, the so called “death tax”, also fits the “new socialist” mold. Again, it apparently isn't “fair” that successful people who have accumulated and paid income taxes on their wealth over their lifetimes, want to divest it according to their personal preferences, often to surviving family members. Instead, Obama and the Left want to “redistribute” it by funding the ever growing welfare state.

The Left leaning Huffington Post blog has suggested that Obama had plans to make a “financial transactions tax” a part of his reelection campaign. Liberal Senator Tom Harkin (D-IA) and Rep. Peter DeFazio (D-OR), the founder of the Progressive Congressional Caucus, introduced legislation in the Fall of 2011 to create such a tax on the purchase, sale and transfer of financial assets; essentially a tax on investors both individual and institutional. The far Left (“progressives”) are anxious to punish institutional investors (“Wall St. bankers”) who they blame for the recession and Obama is quoted by reporter and author David Suskind as saying “we are going to do this!” However, opposition by key economic advisers has so far kept the FTT in the background, probably until after the election.

In May, in spite of the historic 15 trillion dollar federal debt, Obama called for the creation of a government “infrastructure bank” to provide billions of dollars of tax payer money and debt, for government sponsored roads, bridges, dams etc.

The president has long called for hiring more teachers and in June, Obama campaign strategist, David Axelrod said that the country needs to “accelerate” job creation in the private sector “by hiring more teachers, police and firefighters.” Axelrod was unable to explain how hiring thousands of new public sector (government) and unionized workers would help the recovery of the private sector, but he stuck to the claim.

The “Obamacare” health care law isn't the single payer, “socialized medicine” of England or Canada but that was the preference of Obama and the Left after he was elected in 2008. It simply wasn't politically possible with the makeup of the 2009 Congress. A single payer (government funded and administered) healthcare system has the advantages of simplicity and affordability on the part of recipients but the issues of quality, efficiency, and affordability on the part of the government in the face of huge federal deficits and monstrous accumulated federal debt would have to be closely examined in the context of American culture and economics before its adoption. The private insurance company/government health care hybrid of Obamacare brings with it mandatory participation, intervention and regulation. Massive government subsidies to newly insured individuals who are required to purchase it, but by some arbitrarily and bureaucratically divined standard, can't afford it, didn't address these issues. The result has been significant political and popular opposition.

Under Obama, while private sector employment has crashed, the number of federal government employees has grown by 123,000 . Attempts by governors and mayors across the country to rein in public employee unions and excessive wages, benefits and pensions have caused political crises in Minnesota, Ohio and California. Opponents of these efforts, most notably in the attempted recall of Minnesota Governor Scott Walker, included Obama and his core supporters.

Obama and the far Left of the Democrat Party, including former Speaker of the House of Representatives Nancy Pelosi, were quick to support the absurdity of the Occupy Wall Street and everything else, movement which was blatantly, if simplistically socialist, with its “general assemblies”, lack of hierarchical leadership, “international solidarity”, clenched fist banners, verbal attacks on private economic institutions and demands that virtually everything in life be “free” i.e. provided by government.

The “new socialism” is highly visible in France where the head of the actual French Socialist Party, Francois Hollande, has recently been elected President. Hollande's platform includes the following:

Increase to 75% the tax rate on top earners i.e. “ millionaires and billionaires”.

Abandon the German government led Euro-zone austerity plan to cut government spending and reduce deficits, and increase France's government spending.

Implement a financial transactions tax (FTT).

A new 3 percent tax on company dividends and a lower threshold on tax exempt inheritance.

Hire 60,000 new public sector workers, mostly teachers.

The parallels in terms of public policies between Obama and Hollande are striking and while Obama can't be the Socialist Party president in the United States, it appears that he could be in France.

Saturday, July 7, 2012


The 2012 presidential election is thankfully entering its final four months but it will certainly heat up as voters start to pay more attention and the nominating conventions are held, as are the presidential and vice presidential debates. So while it's still “early” in terms of decisive trends it's worth while to take a look at the “starting line” for the final push.

The Romney campaign is continuing its emphasis on the struggling national economy and what it portrays as President Obama's lack of understanding and leadership in dealing with it. The Obama campaign, unable to cite much progress in this area and lacking a list of accomplishments in other areas which might generate real enthusiasm among voters, is focused on personal attacks on Romney for his personal wealth and for pursuing bottom line business strategies related to his private career as CEO of Baine Capital (1984-2001).

Both of these strategies have become hard to listen to. Everyone knows that the economy is bad and simply reminding voters of it in speech after speech and ad upon ad, is effective only up to a point. While candidates at all levels avoid specifics which become political fodder for false analysis, exaggeration and demagoguery towards specific groups, at some point Romney will have to generate some expectations for economic improvement with his plan for recovery.

Obama's attempt to demonize Romney with such things as Romney's personal off shore bank accounts, and his profit oriented business practices from a decade ago seem petty and desperate. He too will have to take the risks associated with specifics and project an optimism infused strategy beyond his 2008 slogan of “Hope and Change”, which after three and a half years rings hollow.

So using the “good news-bad news” framework, the current state of the campaign shows mixed expectations for victory in the Fall. Obama's good news rests mostly on the advantages of incumbency which provide him with unlimited public exposure and the ability to initiate policies which are within the authority of the executive branch alone, and even some that aren't. Such things include his announcement of a World Trade Organization complaint against China over their alleged restrictions on the export of “rare earths” used in the manufacture of electronics (March,2012). After that electoral seat grabber, he used the China bogeyman perhaps a bit more effectively by announcing another WTO action over China's tariffs on U.S. automobiles. This announcement (July,2012) was made on a campaign stop in the important swing state of Ohio, where some cars are manufactured. These actions clearly have a significant electioneering component since WTO complaints often take years to reach resolution and Obama has little else in the area of improving the economy to talk about.

Obama also used or misused his executive authority to pander to Hispanics by directing the Immigration and Naturalization Service to stop deporting illegal immigrants who had been in the country since their childhood. The pros and cons of such a policy can be debated but if the law is to be changed then that is the responsibility of the Congress. The President cannot simply announce that he is not going to enforce existing federal law. But of course he did just that and his approval rate among the nation's Hispanic voters remains strong. 

Obama enjoys more “good news” from current polls. Although certainly not a cause for great rejoicing, he leads Romney in six of seven national polls by an average of 2.7% (within the margin of error). In addition he leads Romney in all eight of the currently identified “swing states” (OH, VA, FL, IA, NC, CO, NV, MO). Current Electoral College predictions give him a lead of 221 to 181 with 270 electoral college votes necessary for victory. That lead reflects the fact that the Democratic base of reliable voters is larger than the Republican base. While some of these voters are simply ideological big government, redistributionists, most just believe that a Democrat president will protect their group interests more than a Republican. Thus, racial/ethnic minorities, homosexuals, union members, environmentalists, and low income earners, historically support Democrat presidential candidates. Sometimes defections occur (Reagan: 1980 & 1984; Bush 1988) when the Democrats nominate weak candidates (Carter, Mondale, Dukakis) but the Democrat core tends to remain committed and Republicans must rely on the large independent vote to win majorities.
The Democrat core is located primarily in large electoral vote states (CA, NY, IL, MI) as well as in the ideologically liberal coasts (WA, OR, New England). Thus the Obama strategy is to take the states won in 2004 by arguably weak Democrat candidate John Kerry, as a given (251 electoral votes) and simply find 19 more.

All of this “good news” makes Obama the current favorite to win the November election but special attention should be paid to the word “current”. It's going to be close and the “good news” for Romney is the “bad news” for Obama.

Romney has run almost exclusively on the state of the economy and the lack of significant improvement over the last three and a half years of the Obama administration. Polls show that the economy is the most important issue in presidential choice for a majority of voters. The most important economic issue is job growth which has been weak for much of Obama's tenure. Unemployment, which reached 9.2% had only declined to 8.2% as reported on July 5th. The June data showed that only 80,000 jobs had been created which just kept up with population growth but did not make a dent in the estimated 13 million unemployed workers. The expectation among economists is that this slow job growth will continue through the end of the year, thus through the November election. While this is bad news for the economy and Americans in general, it is good news for Romney as it validates his campaign strategy.

More bad economic and election news for Obama looms just over the Atlantic horizon in Europe. The Euro-zone of 17 European nations that use that common currency is still in crisis. A default by Greece which has a relatively small economy, on its Euro denominated government debt would put the entire system at risk. But the larger economies of Spain, Italy and Portugal are also at risk and currently dependent on controversial bailouts from the European Central Bank, the IMF and a Euro-zone emergency fund whose largest contributor is a reluctant Germany. The state of the crisis in these countries can be measured by their borrowing costs for standard 10 yr. government bonds. The healthy German economy leads to German bond rates of 1.33% (the U.S. rate for 10 yr. Treasuries is 1.64%). By comparison the 10 yr. bond rate in Italy is 6.03%; Spain 6.95%; Portugal 10.33% and Greece 26.21%. Rates like these, which are necessary to avoid default on existing debt, cause a spiral effect as they add enormous new debt service which itself must be constantly refinanced at ever increasing rates.

The implications for America's struggling economy are enormous as U.S. bank holdings in European banks are put at risk and U.S. trade with European nations experiencing reduced domestic consumption falls off, thus impacting U.S. job creation. All of this is beyond Obama's ability to influence but the negative impact on the U.S. economy would be impossible for voters to separate out from the overall condition and would become part of Obama's economic problem.

In spite of Obama's slight lead in the national and swing state polls, there is some “good news” in the polls for Romney. Obama's presidential job approval seems to have a built in ceiling of just under 50%. For months it has hovered in the 47% to 48% range. Currently (6-20/7-5) it is 47.3% approve and 48.4 % disapprove. It is interesting that this 47% number is also the percentage of current voter preference over Romney cited above (47% to 44.3%) suggesting that if the voter preference remains stuck at his job approval ceiling, Romney can, with a positive campaign and a sound debate performance, overcome Obama's lead and push into the majority range.

Campaigns are driven by money and incumbent presidents have a built in advantage in raising large sums because of their status and the historical likelihood of being reelected. But Romney has been very successful in this area and in June raised $100 million, a one month Republican party record which, if it continues, will allow him to compete in every important state and television market.
In terms of “good news/bad news” there is one significant unknown at this point. That is the recent Supreme Court ruling upholding the key provisions of the Patient Protection and Affordable Health Care Act commonly known as Obamacare. The nation as a whole is evenly divided in “agreeing with” the Supreme Court's decision (46%-46%). However, when asked if they believe that the Act, once fully implemented, will “help” or “hurt” the economy, only 37% believe it will “help” and 46% believe it will “hurt. Republicans and Democrats are strongly divided as would be expected on these questions but the “good news” for Romney is once again with the opinions of self described independents who believe by a margin of 47% to 34% that the Act will hurt the economy. This fact, along with the fact that a majority of state's Attorney's General (26) were a party to the lawsuit challenging the constitutionality of the Act, and the fact that opposition to Obamacare has energized the Republican base, seems to indicate that the issue will remain a significant campaign issue to Romney's benefit.

As summer activities end and the public focuses more on the candidates and campaigns the strengths and weaknesses of both will come more into focus for voters, especially the non-ideologically committed independents. But with the economy still in low growth and high unemployment and an overwhelming majority believing that the “country is on the wrong track” (61.3%-30.2%) after nearly four years of the Obama presidency, it would appear that Mitt Romney can create his own “good news” by making a sound choice for his vice presidential running mate, making a case in the debates for his own vision of the future and frequently asking the famous Reagan 1976 debate question vs. Jimmy Carter: “Are you better off now than you were four years ago?”