Cromwell

This week’s Economist contains an article about the GOP which concludes with the following sentence:  “Political parties, like people, tend to get the reputations they deserve, and the Grand Old Party’s may yet shut it out of the White House next year.”  The same magazine also contains a leader which expresses newfound hope for the party because its “ascendant stars. . .are serious and electable.”  Paul Ryan!  Marco Rubio!  Moderation and good sense abound!

This raises two questions:

1.  Who is being more realistic here?
2.  What accounts for the discrepancy?

As to the first question, I have expressed my opinions on Rubio’s supposed “moderation” on multiple occasions.  I would further note that, even if you assume he is a “moderate,” he is so far behind Carson and Trump in the polls that he can barely see them with a telescope.  No, moderation is not on the horizon.

There are two answers to the second question.  The first one,  the general media desire to split the difference between the parties, has been set out by Paul Krugman so many times it no longer needs elaboration.  The second is that the magazine caters to business people who are natural Republicans; they do not particularly want to hear from the editorial staff that their party is in the thrall of fools and clowns.

Consistent with this, I will be addressing the radicalization of the GOP from several different angles in the coming week.

 

I have the following observations on the decision:

1. Obama clearly didn’t believe the hype from either side about the significance of the decision (for what it’s worth, I didn’t, either).  All of the sound and the fury worked to his advantage in that it created a more valuable bargaining chip.  He could have used it with the GOP to trade for concessions on the budget, but he ultimately decided that he would rather use it to bolster his position at the climate change meeting in Paris.
2. The timing of the long-postponed decision was clearly driven by the outcome of the Canadian election and the upcoming discussions on climate change.
3. If the result of the Canadian election had been different, or if oil prices had not collapsed, I suspect the pipeline would ultimately have been approved.  We’ll never know.

I’ve got those dirty, lowdown, Keystone Pipeline blues.

Obama turned us down after a long review.

The case is over now; there’s nothing left to do.

Things may be different in a year or two.

 

He doesn’t understand the havoc he has caused.

He doesn’t care about the lobby jobs we lost.

He doesn’t see a car; only the exhaust.

Our profits count for less than the permafrost.

 

I’ve got the blues.

The big pipeline blues.

I always knew those Democrats were bad news.

Our patience has run out; it’s no time to be still.

And when we’re back in charge, it’s drill, baby, drill.

The orthodox position within the Democratic Party is to demand gun control measures on a national level, even though extensive recent experience tells us that they cannot pass.  Sanders, partially as a reflection of the views of his Vermont constituents, and partially for other pragmatic reasons, believes gun control should be addressed on a state and local level.  As one would expect, his departure for orthodoxy cost him in the first debate.

In my opinion, that is unfortunate.  It is undoubtedly true that gun control measures work better on a national level, but, practically speaking, that is spitting in the wind, so legislation on a local level is the best we can do.  In addition, whether we like it or not, guns are an important part of rural culture; the Democrats would be wise to acknowledge and defer to that if they ever want to be competitive in rural areas.

The Deep Bench

Republicans were jubilant

After 2010.

Their future rested in the hands

Of formidable men.

 

Kasich in the Midwest.

Jindal in the South.

Perry in the Southwest.

Christie’s boundless mouth.

 

Where did they all go, you ask.

Trump and Carson rule.

The GOP establishment

Is looking like a fool.

 

Sometimes it’s the message

But sometimes it’s the talker.

Sometimes the star you thought you had

Turns out to be Scott Walker.

Mitt Romney ran a campaign in 2012 that was breathtaking in its cynicism.  Everything about the man’s background in business and politics indicated that he was a PBP, but he insisted throughout the primaries that he was “severely conservative.”  In essence, he was telling the Reactionaries what he knew they wanted to hear, while all the time winking suggestively at the PBPs and the CDs.  It worked:  he got the nomination, and outperformed his party in the general election, even though he didn’t win.

Fiorina’s business background vaguely resembles Romney’s, and her most memorable moments on the campaign trail, other than her confrontations with Trump, have revolved around social issues that resonate primarily with Reactionaries.  Could she pull off the same trick?  Probably not, for the following reasons:

1. As I have explained previously, the GOP always wants to nominate someone who reminds them of Ronald Reagan.  Romney might not have sounded like Reagan, but at least he looked a bit like him.  For obvious reasons, Fiorina fails this test.  She would be well-advised to use Margaret Thatcher, who was also much beloved by the GOP, as her role model.
2. Romney was clearly a successful businessman and had substantial credentials as a politician.  Fiorina’s record at HP is a continuing source of controversy, and she has no qualifications as a political leader.
3. Romney profited from the absence of any serious PBP rivals (Huntsman doesn’t count) and from Rick Perry’s failure to grasp the significance of the immigration issue.  For 2016, the immigration issue already belongs to Trump, and the Romney Coalition lane has several reasonably formidable candidates.

I don’t expect much of substance to be accomplished, but the symbolism alone makes it a good thing.  My point in commenting is to note that, notwithstanding Chinese fears of encirclement, the US government would be delighted if Taiwan could be reintegrated into China through a truly consensual process.  US policy is not to thwart the rise of China, but to prevent changes to the status quo created by the threat of force.

Here are a number of potential approaches, and my responses to them:

1. Raise the minimum wage:  This approach is popular among Democrats because it doesn’t involve any government spending and is therefore more difficult to deride as “free stuff.”  It imposes the cost of the welfare state on employers and consumers rather than taxpayers.

While there are studies which indicate that minimum wage increases do not necessarily reduce employment, these are inevitably tied to specific economic conditions.  I don’t think you can automatically assume that increasing the minimum wage will never have a negative impact on employment, and it is my opinion that the cost of societal choices like this should be borne by everyone, not just employers and consumers.  There is definitely a case for some measure of increase, particularly since the value of the minimum wage has been eroded by inflation over the last decade or so, but this is a blunt instrument that should be used carefully and sparingly, and with an eye to local circumstances.

2.  Wage subsidies through the tax system:  In my opinion, this is a better approach from an economic perspective, but it is more difficult politically, because it looks more like unpopular “free stuff” to both taxpayers and recipients, and it drives up the deficit.

3.  Protectionism:  By all plausible accounts, this is the most inefficient way imaginable of driving up wages.

4.  Minimum income stipends:  I think this is where we are headed in the long run, but the public is not ready for it yet.

5.  Make labor more valuable by shifting the cost of the welfare state from employers and employees to all taxpayers:  I will advocate for this in a future post.

The first thing you need to realize is that the PBP wing of the GOP views wage stagnation is something to be desired, not abhorred.  That is why they talk about growth rates, not wages or inequality.

To the (limited) extent that the other candidates have an interest in this issue, their response is to say that tax cuts on capital and deregulation are the solution.  The notion that we can help working people by cutting taxes on capital is, shall we say, counter-intuitive.  If you tease it out, the argument goes something like this:

1. Tax cuts on capital will lead to additional business investment.
2. Business investment will mean new jobs.
3. The new jobs will result in a tightening of the labor market, which will cause wages to rise.

The problems with this approach are:

1. Tax cuts for the rich don’t necessarily result in productive investment and new jobs.  The beneficiaries of the cuts may just invest it in government bonds (now that’s what I call recycling!), or overseas, or in real estate.  Depositing the money in the bank or putting in the market just moves the issue from one set of hands to another; it doesn’t change it.
2. The size of the labor market has to be viewed in light of globalization.  If the nature of the individual business is such that management can credibly threaten the workers with off-shoring, it is unlikely that wages will rise.  As I stated yesterday, I think this threat will diminish over time, but it certainly still exists today.

The bottom line is that the GOP approach to what most Americans view as a serious problem will not work, and in many cases is not even intended to work.

As anyone who reads this blog knows, I think Trump would make a wretched President.  Hard as it is to imagine, however, I think Carson would be even worse.  As a result, here is some unsolicited advice for The Donald as to how to deal with Big Ben at the next debate:

1. Don’t attack him personally.  It doesn’t work with this audience.

2. Don’t comment on his lack of energy, because it is obvious to everyone.  Given the vast difference in the two personalities, the best analogy that I can come up with is watching John McEnroe and Bjorn Borg play tennis.

3. Don’t say anything about his religion, because that is a fight you are going to lose.

4. Do point out how incoherent his positions are on entitlement programs and taxes.

5. Do make it clear that your qualifications for the office, while negligible, are better than his, which are non-existent.

6. Do continue to tap into the anger of your constituents.  It is the fuel that runs your campaign.

 

In yesterday’s post, I indicated that the principal reasons for wage stagnation were globalization, technological improvements, and the decline of unions, but I also suggested that conditions could and would change in the foreseeable future.  Here is my thinking:

1.  The off-shoring of American manufacturing has gone about as far as it can.   While labor costs are obviously a big concern to American manufacturers, they also worry about transportation and energy costs, the adequacy of infrastructure, political stability, and their ability to react quickly to changes in their markets.  Many of these factors are starting to turn in favor of production at home.  Companies seeking lower labor costs in the future will probably be moving from China to some other location in Southeast Asia or Africa, not from the US to another country.  If American workers lose their fear of foreign competition, wage increases should be the result.

2.  Demographic changes favor workers.  The size of the workforce is declining as a result of baby boomer retirements.  This is the principal (if unspoken) reason the GOP candidates for President are all determined to raise the retirement age.  A smaller workforce should drive up wages.

3.  Technological change is a wild card.  No one really knows what impact technological change will have on employment in the future.  History tells us we should be optimistic about this, but this is a “known unknown.”  It is likely to vary wildly from job to job.

There once was a doctor named Ben.

The right really loved him, so then

He climbed in the polls.

Will his gaffes take their toll?

The question is not if, but when.

These are three related, but different, phenomena that call for different governmental responses.  I will try to tease them out there.

Rising Inequality

While a few right-wing economists maintain that inequality is not, in fact, rising, they are outliers; all of the credible evidence suggests that it is–not just in the US, but throughout the world.  The principal drivers of  increased inequality are globalization and technological change, but it has been exacerbated by government policies on taxing and spending, particularly in this country.

Is the average American really upset about this state of affairs?  I would say not, because, to the average American, the super-rich are sports and media stars, not hedge fund managers, and the nexus between their work and their compensation is obvious.  It is true that LeBron James, for example, is not typical of the average plutocrat, who is much more likely to be a CEO or a financial honcho, but I don’t think the American public views it that way.  In any event, people are more likely to view inequality in the context of people they know, and the lifestyle of a typical CEO is not something with which average people are familiar.

Rising inequality is both a political and an economic problem.  It is an economic problem because the shrinking of the middle class leads to a smaller base of consumers and, therefore, increased instability; the political problem, in the age of Citizens United, obviously is an unfair degree of access to politicians and regulators.  That said, I don’t think inequality by itself is the source of the widespread unhappiness with the political system that has manifested itself both on the left and the right.

Declining Opportunity

There is also plenty of evidence that American society is becoming more oligarchical as a result of the convergence of a knowledge-based economy and the propensity of well-educated people to marry and cluster together in similar communities.  There isn’t a whole lot the government can do about this;  to the extent that it does have some power, it involves changes to the educational system that will have to work themselves out over decades.  I don’t think this explains popular concern about the economy, either.

Stagnant Wages

If wages were rising at a historically high rate, but profits were increasing at an even higher rate, would working people be complaining?  I doubt it.  Wage stagnation, not inequality, is the principal source of frustration with the system.

All of the evidence I have seen indicates that stagnating wages have been a problem since the late 1970’s.  The principal reasons for stagnating wages are globalization and technological change, and how they are perceived by working people.  If you believe that your job is under threat every day by a machine or someone in India, labor militancy is probably not in your future.  The withering away of unions is also a factor, although the ongoing relevance of unions in an economy in which the means of production are frequently laptop computers is debatable at best.

Is this state of affairs immutable?  No, for reasons I will discuss in a subsequent post.

Several moderate center-right pundits, most notably David Brooks, breathed a sigh of relief after the last debate, because they now view Marco, a supposed responsible establishment candidate, as the front-runner.  It has to be said, however, that some center-left pundits have fallen under his spell, as well;  I suppose that is no surprise, since Marco’s youth, back story, and occasional lucidity make him look more like a Democrat than a Republican.  In other words, when the other GOP candidates bash him for looking like a new Obama, that only endears him to the left.  But does the medium coincide with the message?

No.  Consider the following:

1. Marco indicated in the first debate that he supported a total ban on abortion, with no exceptions.
2. His tax plan, memorably described as “puppies and rainbows” by Josh Barro, is heavily weighted towards the extremely wealthy.
3. His energy plan can be described succinctly as “Drill, baby, drill.”
4. He is not prepared to take any steps to ameliorate climate change.
5. Other than Lindsey Graham, who is in a class by himself, he is the most hawkish of the GOP candidates.
6. He has collaborated with Ted Cruz to try to shut down the government.
7. His Obamacare replacement plan is intended to move workers out of employer plans and into individual policies.  There is a case to be made for that, but it can’t be denied that it would be a major change.

Does that sound like a “moderate” to you?

We Didn’t Come From Nothing

White noise from my TV.

Days of fear and rage.

Walls are rising everywhere.

It’s not a golden age.

 

Gridlock all around us.

Thinking white and black.

Today the road of progress

Looks like a cul-de-sac.

 

Hamilton and Jefferson

Lincoln/Douglas, too.

FDR and GOP

Conflict’s nothing new.

 

We didn’t come from nothing.

We’ve been through it before.

You don’t need to be cynical

If you know the score.