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Wednesday, February 25, 2015

REPUBLICAN PRESIDENTIAL RACE

With twelve or more “potential” presidential candidates and counting, the Republican effort is taking on the aspect of Yogi’s famous quote, “It’s déjà vu all over again”.  A dozen is plenty to form another circular firing squad to produce “The son of 2012”.
 
Granted, the ratio of credible candidates in terms of background and qualifications to the status seeking fringe dwellers is better this time but attempts by the Republican National Committee to avoid the chaos of the ridiculous number of primary debates in 2012 will be undermined by the sheer number of candidates.  “Debates”, which are really hyped group interviews and which are hijacked by publicity seeking moderators, simply can’t be organized around twelve or more candidates.  A two hour format with breaks, would allow less than four two and a half minute questions and answers per candidate.  

Even avoiding the Gong Show nonsense perpetrated by moderators in the past, the expectation of any serious discussions on policy positions would be very low.  The post-debate panels of “theater critics” focus on style over substance and alleged gaffes, to decide the “winners” and “losers”.

But that’s just the stylistic issue with this crowded field.  The more serious problem as exhibited in the 2012 primary election season was the fratricidal demonizing of the front runners even before the Democrats took their shots.

The primary campaign is a competition and it should demonstrate the differences in approach to important national issues.  The problem is that the inflated multi-candidate competition can become a desperate campaign of personal and hyper-ideological attacks to attract narrow interest group support which divide and disgust the broader conservative voting constituency and which provide fodder for the same kind of demonization by the Democratic candidate and “her” Greek chorus in the media and blogosphere.

Some conservative columnists have lauded the fact that there are “fresh faces” in this season’s stable of candidates, and indeed there are.  But fresh isn’t the same thing as credible or electable and “old” faces whose political shelf life is near their expiration  dates clutter up the landscape. 

Among the newer possibilities, some do stand out in a positive way.  However, it would be a mistake to take the response at Iowa’s recent “first in the nation” political event, the Iowa Freedom Summit, as a reliable measure of electibility on a national scale.

That the Iowa  caucuses to be held in January, 2016 are important because they are “first” is a media inflated assertion and they say little about competence.  Iowa voters are not  representative  of the national electorate nor reflective of Republicans and conservative leaning Independents nation-wide. This is easily demonstrated by the winners and runner ups in previous Iowa caucuses.

In 2008 the Iowa Republican Caucus winner in January, was Mike Huckabee who dropped out of the race in March after winning only 278 delegates in several primaries. The actual Republican nominee was John McCain who came in 4th in the Iowa caucuses. 
In 2012 the Republican Iowa Caucus winner was Rick Santorum who dropped out in April after accumulating only 250 delegates;  the Republican nominee was Mitt Romney.
 
Huckabee and Santorum are back.  It remains to be seen if their messages are different this time around but the narrow, faith based political orientation of Iowa’s mostly evangelical Christian Republican voters is likely to remain the same.

Huckabee, the former Baptist minister and Arkansas governor, already seems to be trying to repeat his caucus winning appeal to religious conservatives by criticizing gay marriage and sexuality of  all sorts.  These positions might get him some votes in socially conservative states as personal opinions  but  they don’t represent any  viable legal or public policy positions and stand in opposition to majorities in public opinion polls.

Santorum ran in 2012 as the anti-abortion, anti-birth control candidate which drowned out his other positions on economic and security matters.  If he follows Huckabee’s lead and tries to repeat a social issues victory in the non-representative Iowa caucuses in 2016, he will split the religious conservative vote with Huckabee and both will become  early second time historical footnotes.
 
Rick Perry, quasi-“fresh face” former governor of Texas and brief Republican candidate in 2012 is looking like he’s giving it another try.  If so, he can be expected to combine traditional southern conservatism with emphasis on the vibrant Texas economy in comparison with the slower and struggling economies of other states.  It remains to be seen if the recent slump in oil prices and attendant lay-offs in the heavily energy dependent Texas economy will harm this message.  He lasted only four months in 2012 and dropped out after saying in a televised debate that he would cut several federal cabinet departments if elected President but then couldn’t remember which ones.  

He is not an exciting speaker but if he can remember his positions this time he might last at least past the Iowa Caucuses in January but it is hard to see that he would have much appeal in the second primary in New Hampshire where Texas drawls and social issues don’t excite the voters as much as economic issues.

Sarah Palin showed up at the Iowa Freedom Summit after saying she was “interested” in running  for President.  She isn’t.  She is just trying to keep her name in the media discussion to support  her dwindling  speaking fees.  She has no personal money raising ability, no competent staff, and no desire to do the hard work to become conversant with the important issues. That is a good thing since she would be embarrassing side show as she was when she gave a cringe inducing, head shaking and incredibly incoherent speech to the befuddled conservatives at the Summit. 

 Since her similarly rambling speech while resigning from the governorship of Alaska in 2009, Palin has demonstrated the same remarkable empty headedness and lack of intellectual curiosity that contributed to the failed McCain/Palin campaign in 2008. She has has since limited her public political pronouncements to ideological platitudes, semi-comical attacks on the “lame stream media” and anti-liberal bumper sticker quality slogans.  It is unlikely that she would again subject herself to a public test of thoughtfulness in a televised debate.

But what  about  the  “new faces” for 2016?   At this point are there is much talk about Wisconsin Governor Scott Walker who made his reputation by taking on public employee unions, surviving a union inspired recall election, and then going on to win a second term in the next general election, all in the “blue” state of Wisconsin. 

That history certainly has appeal to Republicans and will keep Walker in the news, and the race  unless he fails to formulate a broader vision and specific policies that recommend him to a wide segment of voters.  As the current threat to Hillary by virtue of positive poll numbers, his lack of a four year college degree has been hyped by liberal foot soldiers in the media but is over stated.  He finished three years and quit to go to work , and his lack of a diploma might not hurt him with the 74% of the population who also do not have college degrees.   

His success will depend on his intellectual acumen and grasp of public policy issues which will determine his fitness for office, but that is to come. Recently however, he has been tempted to try for an early win by  emphasizing  the positions  on abortion and gay marriage that appear to be litmus tests for Republican voters in Iowa.  Once stated those positions become embedded in a candidate’s  public perception of him and will harden opposition among  more centrist voters.

Chris Christy, the Republican governor of “bright blue” New Jersey is indeed a “fresh face” with a fresh “say it like it is” personality which has a certain appeal to those who see most politicians  as double talking and unassertive.  His early popularity in polls vs. Hillary brought immediate attacks from the threatened liberal punditry but proved ineffective.  He is not the rigid social conservative that Iowa voters like but he is emphasizing other issues and could be a surprise player.

Rand Paul, the Republican Senator from Kentucky is an interesting candidate since as a libertarian he doesn’t represent the typical conservative politician who accepts certain levels of government as inevitable and/or  necessary, as well as greater levels of foreign policy and military involvement.  Paul has been trying to move to the middle some, as well as adopting some positions traditionally found on the Left such as criticizing the “security state” with regard to surveillance and privacy.  But an isolationist foreign and trade policy is difficult to sell in a world immersed in globalization and beset by economic challenges, instability, and terrorist threats.  Still, Paul offers an interesting counter point to international activism and appeals to voters who want the rest of the world to solve their own problems.

Marko Rubio, Republican Senator from Florida comes across as intelligent, articulate and compatible with traditional conservative positions.  He is also “Hispanic” in the Cuban immigrant sense of the word, and has a political base in Florida which is a very  important  electoral college state.  He is also young (43) and may seem to some voters as still relatively inexperienced and untested.

Ted Cruz is the junior senator from Texas.  While a “new face” and an unrepentant social and ideological conservative, he often appears strident and unrealistically uncompromising, as his willingness to deny passing a continuing resolution to fund federal government operations and avoid another politically disastrous government shutdown has shown.  

His focus on repealing Obamacare has made him a popular  figure  among  those who see this program as Obama’s biggest failure, but Cruz will have to broaden his appeal. He is a first term Senator and at 44 also relatively young.  He sports an Hispanic name but while his father is Cuban born, his mother, a natural born American citizen, is not and he was born in Canada, thus his appeal to the mostly Mexican and Central American Hispanic voters based simply on ethnicity is questionable.

That leaves the rest of the “fresh faces” with the exception of Jeb Bush, which as a group fall into a category best described as “clutter”.  “Dark horses” have occasionally emerged in U.S. national politics but the reality of the need for huge financial support, experienced staff and the ability to capture a defining  issue  makes  these  candidates real underdogs.

Ben Carson is a soft spoken values candidate.  His background, and only expertise  as a neurosurgeon detracts from his credibility as the potential “leader of the free world”.  Following  a President who entered office with little on his resume’ to recommend him as a competent candidate and then proving over and over that he wasn’t, will be a tough sell for the surgeon.

He currently seems to be adopting the role as the “conscience of the conservative” movement and he will have to address the need for specific policies which he can explain and justify if he wants to attract financial support and progress past the social issue primaries in Iowa and mostly southern states, which seems highly unlikely.

Carly Fiarino is this year’s “female Republican candidate”, maybe.  In 2012 it was former Representative Michele Bachmann .  Being female  wasn’t  enough for Bachmann and won’t be enough for Fiarino.  While Bachmann suffered from terminal goofiness, Fiarino enters the race, if she does, suffering   from a complete lack of political experience.  

Nonetheless, there is a quasi-strategy among some of the candidates who are governors or former governors which touts their “non-Washington” background.  Whether Fiarino could use this to her advantage remains to be seen.  What is known about her is that she made a successful career in technology, rising from an administrative trainee at AT&T in 1980  to CEO of tech giant Hewlett-Packard in 1997.  Much was made of her being a “first female CEO”, “most powerful female in business” etc. which could be a slight asset in a presidential race but not a defining one.  The downside of her background is the fact that she was fired from Hewlett-Packard in 2005 after a dispute with its Board of Directors.  

Since then she has herself made a career out of serving on numerous other corporate and non-profit boards.  Her one foray into electoral politics was a failed 2010 attempt to unseat Democratic California Senator Barbara Boxer in an election which she lost badly.  All in all, besides being female and having a strong private sector and executive background there is not much that separates her from most of the other potential candidates and it will be a difficult task to excite and inspire a political following sufficient for the job.


That leaves Jeb Bush who is either the “elephant in the room” or the dark shadow of the former president, his brother George W. Bush.  He is smart, articulate, and was a popular governor of Florida.  He has been cast as a “moderate” by both his supporters and his adversaries.  Hard core conservatives denounce his public stands on immigration and the “Common Core” education initiative.  Independents and center Left voters might like him but dedicated liberals see him as the heir to George W.’s presidency which they condemn as incompetent and dominated by a “failed” war in Iraq. For some voters three Bush’s in the White House might just seem to be “too much”.  However, compared to two Clintons it might not seem too bad.  

The Republican “establishment” i.e. big donors, seem to be coalescing  around his candidacy  but it is very early in the process and he will have to withstand  the “too moderate” criticisms from the Republican Right and the “too Bush” criticisms  from the Democratic punditry  for the long haul.

For Jeb, being a “moderate” isn’t good in the early Republican primaries of Iowa and South Carolina which pundits like to characterize as make or break contests.  New Hampshire which follows Iowa is conservative but less dominated by social issues and that primary might be a launching pad or a “flame out”  for Jeb. Mitt Romney was attacked for the same lack of ideological rigidity but overcame it by simply appearing to be the most electable, in no small part because voters outside the doctrinaire Right saw him as more moderate.  So far Bush’s early poll numbers show him to be withstanding the “too moderate” narrative but the primary season hasn’t yet formally begun and all the candidates will eventually have to show that they have actual answers to the nation’s problems.  Unfortunately, this effort will be clouded by exaggerated ideological and personal  attacks  as the candidates try to separate themselves from their opponents.  Hopefully,  this herd  of candidates will dwindle to a number insufficient to form the circular firing squad and the target will switch to Hillary.




Thursday, February 5, 2015

GREECE: ADVANCED WELFARE STATE MEETS REALITY



The recent election in Greece of a far Left government presents a challenge to decades of thinking in the halls of European Union and the 19 nation Eurozone group.  Always oriented to the Left in spite of the usual “conservative/democratic socialist” pendulum swings among the governments in the member nations, the treaty based organizations now find themselves dealing with a revolt against fiscal discipline in a small nation that ironically is “too entrenched in the system to fail”. 

New Prime Minister Alexis Tsipras led his Syriza party to a parliamentary plurality with the appeal of his defiance of a punishing austerity program imposed on the Greek economy by its bail out saviors, the European Central Bank and the International Monetary Fund. 

Years of corruption, tax evasion and profligate government spending to support the never ending demands of a huge and highly unionized public labor force and the purchase of voters support through the unsupportable expenditures of an advanced welfare state, brought about the inevitable reality of economic crisis.

The crisis is not new but the tipping point was the 2009 world-wide recession.  In 2010, when Greece faced the possibility of not being able to pay its international debts the EU and IMF extended two “bailouts” in the form of $140 billion and $165 billion.  Private sector investors (banks) wrote off three quarters of the value of their Greek government bond purchases and recast the remaining balances to longer maturity dates and lower interest rates.

These actions did not represent “gifts”.  Conditions were attached which included significant government spending cuts, tax increases and major “labor market and government pension reforms” (cuts).  However, so  dependent by the government on the injection of liquidity into the economy by its spending patterns that the “austerity” reforms had the effect of drastically reducing government tax revenue.   The result was a kind of circular and self -reinforcing crisis. The crisis also led to potential bond purchasers to demand significantly higher rates of return which also heightened the burden of future repayment of interest and principle.

In spite of the hardships and contradictory outcomes of the austerity conditions ECB officials, led by Germany and IMF officials held fast to their determination that any relief demanded that the Greek government bring about future financial stability and live up to their repayment obligations for the loans already paid out.  That resolve remains today as tax payers (and voters) in financially stable Eurozone nations object to bailing out what they see as irresponsible excesses by former Greek governments.

Eurozone finance ministers in 2012 gave Greece until  2016  to meet the required deficit reduction requirements.  This is a huge problem as Greek debt and the interest payments it produces amounted to $407 billion or 175 % of GDP.  With   government tax revenue, already low because of rampant evasion, it was, and remains,  grossly inadequate.

The politics of the crisis represent a seemingly impossible conundrum.  From the point of view of the ECB,  private sector investors and the IMF, loan forgiveness, new loans and below market interest rate concessions without the necessary cuts in spending which demand cuts in public services, public employment, and tax reform, creates a permanent black hole of international support. 

However, without support in the short term the Greek government is in danger of default on its sovereign debt.  This debt is issued in the Eurozone currency, the Euro.  Default would result in the devaluation of the Euro across the zone and would probably require Greece to drop out of the Eurozone.  That in itself would exacerbate the crisis since a return to the Greek drachma currency would immediately result in a major devaluation of that currency since Greek debt would no longer be propped up by the Euro.  This would make it almost impossible for Greece to borrow in international financial markets as well as cause hyper-inflation in Greece as everything imported would be much more costly.  The prospect of a nation essentially going bankrupt would loom on the horizon.  EU leaders want to avoid such a scenario if at all possible.

This would seem to point to tough negotiations to achieve some sort of compromise which afforded new bail out monies and a continuation of,  if somewhat less stringent, austerity measures. 

Now the context of negotiations has changed with the new Greek government.  The hardships of the situation on the Greek people have produced a reaction which focuses on relief from the austerity program without concern for the longer term prospects of a lack of reform.  This should not be a surprise given the growing strength of the political Left in Greece and in other southern European nations hard hit by the recent financial crisis, especially Spain and Portugal.

The victor in the January, 2015 Greek election, the Syriza party is led by Alex Tsipras.  Syriza is actually an acronym for the group named the Radical Coalition of the Left, itself an umbrella group of leftist parties.  Mr. Tsipras, a forty year old activist and now Prime Minister, came from the youth wing of the Greek Communist Party, and was a candidate for mayor of Athens in 2006.

He campaigned on a vow to reject the austerity program required by the extenders of the billions of bail out money and to demand a renegotiation of all terms.  That such a promise was politically popular is no surprise.  What is a bit unusual and reflective of the widespread unhappiness with the conditions is the creation of the “strange bedfellow” of Right wing party New Democracy with which Tsipras formed a coalition government in order to create a parliamentary majority.

It remains to be seen how long this “marriage of convenience” will last.  What they have in common is a strong anti-austerity position.  New Democracy leader Panos Kammenos has described the nation’s creditors as “foreign conquerors” but unlike the Sryiza Party’s current position which endorses continued membership in the Eurozone,  New Democracy feels that Greek sovereignty has been diminished by the EU and IMF.

The prospects for a workable negotiated compromise are daunting.  Market factors which are not controlled by either side are having a dramatic impact on the problem.   In response to the new Left wing government’s election,  concerned investors drove Greek stock prices down  and borrowing costs up.  Bank shares lost 27% after the election.

In simple terms the short term Greek situation is as follows:

The bail out in progress by the ECB, the European Commission and the IMF is scheduled to end on February 28, 2015.  Under prior agreement an additional 1.8 billion Euros could be provided in the form of loans if the new Greek government fulfilled the “austerity” conditions previously required.  However estimates of the amount Greece will need to meet its obligations in the first quarter of 2015 run as high as 4.3 billion Euros leaving the Greek government  little leverage in negotiations to renegotiate debt already outstanding.

The Greek Prime Minister and Finance Minister are traveling the capitals of Europe  (2-4-15) for meetings with top political and European Union officials in an attempt to negotiate the required terms to keep the Greek economy afloat.  Early reports indicate that the Greek officials have “blinked” with regard to their domestic assertions that Eurozone held debt would have to be “written down” i.e. forgiven at least partially.  Resistance by Germany and EU officials made this a non-starter in negotiations .  However, there have also been some conciliatory remarks from the President Hollande  of France with respect to the need to find some compromise. 

However the political situation which results from Prime Minister Tsipras victory has made his ability to negotiate much more difficult even if he wanted to, which is dubious given his background and ideological orientation.  He promised to increase government spending,  not reduce it.  Included in this effort was to be forgiveness of electrical bills, expansion of food stamps and an apparent abandonment of a proposal to raise revenue by privatizing government owned entities, as well as the more general promise to seriously diminish the austerity program through renegotiation.  Failure to live up to these election promises could create significant political problems for his government coalition.

The political stakes are also significant for the Eurozone since major concessions to Greece will not be lost on Leftist and populist movements in other struggling countries such as Spain.  Germany and the EU Commission which is executive branch of the entire European Union, are very concerned that such a turn of events could destroy the cohesiveness of the Union and drastically affect the value of the Euro.  Nonetheless,  a failure of Greece to take the necessary steps to stabilize its economy and default on its debt could bring about a voluntary or mandatory withdrawal from the Eurozone which Germany and the Commission also want to avoid.

The multiple causes of the Greek crisis may offer lessons for other EU and Eurozone nations which are already known and may come too late to avoid .  A fundamental flaw in the structure of the Eurozone contributed and remains.  The European Central Bank, a rough equivalent of the U.S. Federal Reserve Bank was charged with managing monetary policy for the Eurozone nations.  The difficulty of imposing a single policy on nineteen different political economies and political cultures was clearly underestimated.  Inflation, employment, export vs. domestic industrial prospects and the ability of the central banks of the individual countries in the zone to issue debt denominated in the shared currency all represent a weakness in the system.

 Also in Greece as in most of the EU nations, the ideological orientation which informs the creation of advanced welfare states lays at the foundation of the crisis.  A bloated public employee sector designed to provide political patronage and prop up employment produces nothing to contribute to economic growth and demands constant increases in expenditures in the form of wages, benefits and retirement. 

Tax evasion was tolerated and public services and ever growing entitlements expanded as deficits were funded by debt creation.  The reality check imposed by the 2009 world recession brought an end to the cycle of debt creation, interest obligations and unchecked social program expansion.  The  debt service to revenue ratio simply became unsupportable.  This is basic economics but the demands of domestic politics turned the heads of the political leadership and the crisis imploded.

Now citizens of Greece and other southern European nations blame their governments for the harsh remedies imposed by international lenders without much concern about the failed underlying policies from which they benefitted.  The so called array of “populist” movements will try to defy the dynamics of the self- correcting capitalist systems but will inevitably fail.

The results of the Greek crisis do not apply equally to the U.S. but the symptoms are relevant.  The U.S. economy is huge and diversified and it enjoys the benefits of the U.S. dollar being the foremost international reserve currency.  But the constant expansion of advanced welfare state characteristics, especially uncontrolled federal debt to pay for associated excessive spending will have consequences.  Higher interest rates to renew such debt and the growing diversion of national income to service the debt, at some point will put pressures for devaluation of the dollar against other currencies and will be inflationary by making foreign imports more expensive.  The Federal Reserve’s response to inflationary pressures will be to reduce the money supply by selling government bonds and raising short term interest rates. It is a delicate balance and the current deficit/debt growth and the ideologically based expansion of government demands similar attention as that being applied to Greece.