Cromwell

1.  Events have reached the point where even the German leadership admits the Greek debt is unsustainable, but the parties have done nothing meaningful to change their positions in the negotiations over debt relief.  How ridiculous is that?

2.  A large part of the problem here is that there is no bankruptcy process (i.e., one ultimately guided by an independent third party using a well-established body of law) for the parties to use.  Instead, all decisions result from negotiations between parties with decidedly unequal bargaining power.  The unsatisfactory outcome of that process was and is inevitable.

3.  The essential difference between Greece and the other EU bailout recipients is that Greece had both a governmental overspending/credibility crisis and a euro-driven private sector bubble, while the others only had the latter.  If you are looking for reasons why the Greeks are in a bigger bind than the Spanish and the Irish today (life isn’t exactly paradise in those countries, either), start there.

4.  In retrospect, the Greek government would have been better served if it had sucked up to the Germans and conceded that their system needed a complete overhaul to be more, well, Germanic, in exchange for some debt relief.  Instead, they turned the issue into an EU referendum on austerity, and lost.

Fast forward to 2017.  Having successfully (at least in their eyes) dealt with the Greece question, the Germans have been pestering the French to reduce their deficit and institute “structural reforms” for the last 18 months.  Francois Hollande, Nicolas Sarkozy, and Marine Le Pen are running for president.

Ms. Le Pen makes roughly the following argument to the French electorate:

“For years, the Germans have been telling us we have to become more like them–work harder, spend less, and save more. M. Sarkozy agrees with that, and will work hand in hand with the Germans to dismantle the social protections that we consider to be an essential part of our culture.  M. Hollande can’t make up his mind; sometimes he half-heartedly stands up to the Germans, but sometimes he goes along with them and tries to pretend that we are equal partners in austerity.  As a result, he accomplishes nothing, and the EU has become nothing but a German empire.

If you don’t want to give up your August vacations on the Riviera, your long lunches, and your 35 hour work week, there is only one candidate who will stand up for you and for France–me.”

It is just about a foregone conclusion at this point that Le Pen and Sarkozy will be in the run-off.  The widespread assumption is that the establishment will stand firm for Sarkozy, and he will win.  Personally, I think that Le Pen’s argument is going to resonate with French workers, and I wouldn’t bet the ranch that she will lose.  If that turns out to be the case, life in the EU is going to get even more interesting than it is now.

1.  The Germans never wanted to give up the mark.  They were talked into it by the French, who viewed it as an essential part of the effort to build an “ever closer union.”  To the German people in 2015, an “ever closer union” almost certainly means a “transfer union,” and they don’t want any part of it.  There is no reason to continue to pursue a dream that is already dead.

2.  A new mark would undoubtedly soar in value, thus making the population wealthier and imports much cheaper.  This would create a substantial stimulus for the EU as a whole.  The remainder of the EU would have a euro with a lower value, and would be able to increase exports and growth and ultimately reduce debt.

3.  Any moral obligation to bail out the overspenders would disappear.

As far as I can tell, the only reason for the Germans to stay in, other than mere inertia, is that it creates a platform for them to impose their values on the rest of the EU.  The potential consequence of that will be discussed in a future post.

Suppose you are Angela Merkel, Chancellor of Germany.  You look at your country and see serious long-term demographic issues, which will ultimately create financing problems for your welfare state.  Your country’s culture emphasizes thrift, in any event.  Under these circumstances, it makes both economic and political sense to keep public spending and aggregate demand under strict control.

Suppose, instead, you are Angela Merkel, de facto leader of Europe.  You see stagnation and double-digit unemployment in most of the continent.  In places like Spain and Greece, the unemployment rate is over 20 percent, with little hope of substantial improvement on the horizon.  One of the obvious ways of dealing with these problem is to take actions to increase demand in Germany.

Which course do you take?  You are responsible to the voters of Germany, but not Europe.  What do you think?

In the not-so-distant past, France and Germany ran the EU as partners.  No longer, due to robust German growth and French stagnation.  It has gotten to the point where the Germans don’t even pretend to treat the French as equals anymore.  And if President Obama wants to call Europe, he knows which number to use, and it isn’t answered in Paris or Brussels.

I always had trouble understanding exactly how the institutions in the Holy Roman Empire worked in practice, but the evolution of the EU has made it more clear to me.  Substitute Angela Merkel for a Hapsburg emperor and it all starts to make sense.

The dual role of the German Chancellor as the head of state of an individual nation and the de facto leader of Europe is naturally going to create a whole new series of issues for the EU.  This will be discussed in a future post.

 

Republicans offer the electorate nostalgia for a better past, promise to get rid of environmental regulations that they can plausibly (although not very accurately) claim are the source of the area’s economic problems, and visibly embrace rural cultural values.

Democrats offer government benefits that provide little more than subsistence.

Is it any wonder that (a) is winning?

One of the best insights about politics that I ever received came to me in a dream.  A character in the dream, identity unknown, told me that the American people don’t really expect their leaders to solve their problems, but they have to know that their hearts are in the right place.  If you think fairly hard about it, that explains a lot of what happens in politics, which would include Hillary Clinton’s wish list of an agenda.

The bottom line is that the Republicans are going to maintain control of the House after the 2016 election, and quite possibly the Senate, as well.  As a result, few, if any, of the Democratic agenda items are going to become law.  Hillary is undoubtedly well aware of this. With that in mind, what can her supporters actually expect her to do, in the real world, if she is elected?

First, she would stop a Republican counterrevolution in domestic policy, which would include: cuts and counterproductive structural changes to entitlement programs; massive cuts to anti-poverty programs; large tax cuts on capital; the dismantling of regulations on financial institutions and pollution sources; new legislation restricting abortion; and, in all likelihood, a national right-to-work law.

Second, she can stop us from going to war in the Middle East for little or no good reason.  Her support of the Iran deal provides some needed reassurance on that point.

Third, she can try to make deals with Republicans based on mutual self-interest.  Obama has had little success with this, but it could be tried again with a slightly different case of characters.  These could include the following:  income tax cuts in exchange for a carbon tax; entitlement cuts in exchange for infrastructure spending; trading tax cuts for working people for tax cuts for the wealthy (deficit be damned); pro-business changes to immigration law; or getting rid of the Obamacare employer mandate in exchange for additional discretionary spending.

Fourth, she can use her regulatory authority to the maximum extent of the law.

That’s about it.  In terms of making actual social progress, as opposed to warding off disaster, it may not be very inspiring, but when you consider the alternative, it doesn’t look bad at all.

 

 

 

By all accounts, Taylor Swift was born and raised as a blue person.  She found her opportunity, however, in Nashville.  Her records became progressively more pop (i.e., “blue”) as time went on, and she finally decided to move to New York and embrace a more urban audience and lifestyle.  As far as I can tell, however, she did this without offending her country fans, who viewed her departure with regret instead of anger, so she can still cross over if the occasion presents itself, as I suspect it will at some point in the future.

Her music does not really speak to me, but I have great respect for her intelligence and business sense, and I think there is a lesson in this story that the Democratic Party needs to hear:  a little effort to understand and visibly respect red culture can do a world of good.

T.S. 1989 2016!

Just as the Republicans have done their best to nominate Ronald Reagan, or his latest incarnation, since the 1980 election, the Democrats have been looking for the new JFK since 1963.  Several contenders were nominated, but found wanting for one reason or another.  At long last, they struck it rich with Obama–young, fresh, charismatic, and a great speaker– in 2008.  A more appropriate JFK successor could scarcely be imagined.  But now his tenure is winding down, so where do the Democrats go from here?

The likely Democratic nominee is an extremely experienced politician whose campaign theme will be her ability, in spite of (or maybe because of) her many scars, to get things done, because she has succeeded in maintaining relationships with Congressional leaders in both parties regardless of personal and ideological differences, and she knows how to cut deals.  In short, great speeches and charisma are all well and good, but it takes an insider with thick skin to make the system move.

It’s perfect.  Hillary is the new LBJ.

The Democratic Party essentially represents the negation of the agenda of the Reactionary faction of the Republican Party.  It consists of groups that have  been denied power within the traditional authority structure, and which have demanded assistance from the state for the purpose of attaining equality of treatment.  These groups, and their respective oppositions, include:

1.  People of color, vs. whites;

2.  Feminist women, vs. men;

3.  Gays, vs. straight people;

4.  Labor, vs. capital;

5.  Poor, vs. rich; and

6.  Secularists, vs. organized religion.

Most of the time, the agendas of these groups do not conflict, so the party (at least in recent years) has been more united and cohesive than the Republicans, whose divisions in Congress are all too visible on a daily basis.  There is no doubt, however, that white working men are on the wrong side of several of these conflicts, which, along with the party’s failure to provide a convincing response to economic shifts caused by technological change and globalization, has resulted in large scale defections to the Republicans among white men.

There is a whiff of triumphalism about the Democratic Party’s view of the demographic changes that appear to provide it with a working majority during presidential election years.  Leaving aside the fact that the off-presidential electorate routinely chooses a Congress dominated by Republicans, which makes pursuing an ambitious legislative agenda impossible, one has to wonder what will happen if and when the groups listed above start to lose their sense of grievance.  I don’t know if or when that will ever occur, but it could.

One interesting paradox regarding the Democrats is that they routinely provide vigorous support for entitlements for the elderly, but the elderly are among the most reliable cohorts of Republican voters.  How long can that contradiction persist, and in what way will it ultimately be resolved?  That is a subject for another day.

Blue people think red people are an inferior class of American, but red people deny that blue people are even real Americans.

With that transition, the next few posts will be about the Democratic Party.

But, you say, it is the “Texas Miracle” that created all of those jobs, even during the Great Recession.  Rick Perry insists that it was the product of low taxes and minimal regulations, and proposes it as a template for the entire country.  My point is that they have low taxes, similar weather, and minimal regulations in Mississippi, but no “miracle.”  Why not?  What makes Texas different than Mississippi?

There are a number of potential answers to that.  Oil unquestionably is a big part of it, but there are other elements, as well:

1.  Proximity to the Mexican border;

2.  Greater public and private investment in higher education and the arts (yes, there are some islands of blue in the red Texas sea);

3.  Jobs associated with the space program;

4.  Greater state investment in infrastructure; and

5.  (Possibly) lower housing costs due to minimal local land use regulation. (I doubt the regulations in Mississippi are very strict, but it is a fact that housing costs and regulations in Texas are very light).

It would be logical to conjure an argument for a different kind of GOP that juxtaposes additional infrastructure and education investments supported in part by tax dollars with a very minimal safety net in the interests of maximizing growth.  Leaving aside the question as to whether one would like to live in a Dickensian state in the 21st century, I haven’t seen Perry (or anyone else) make the argument like that.  In any event, there are elements of the “miracle” that cannot be reproduced in most of the country.

 

 

The Romney Coalition subprimary candidates are Bush, Rubio, Christie, and Kasich.  The last two are not serious contenders:  Christie just carries way too much baggage; and Kasich appears to be well on the way to winning the Jon Huntsman Memorial Worthy Candidate With No Public Support Award.  The winner will be either Bush or Rubio.

This is going to be fascinating.  Bush has a substantial advantage in fundraising and establishment backing, but how is that going to translate into popular support?  How can he tailor his message to distinguish himself from Rubio, who comes from the same state, was part of the same state government, has similar policy positions, and has an even stronger connection to the Hispanic community?

Rubio’s greatest points of vulnerability are his executive inexperience and lack of swagger.  My guess is that Bush will run plenty of commercials that look similar to Hillary’s 2008 3 AM phone call ad in order to emphasize this point.  Whether that will work or not remains to be seen.

Rubio, on the other hand, profits from the fact that Jeb! can spend a billion, or ten billion, dollars on ads, but it won’t change his last name or his connection to his unpopular brother, with whom he has no apparent policy disagreements.   The Rubio campaign doesn’t really need to do anything to exploit this advantage, but expect to see plenty of commercials talking about fresh ideas, even though he doesn’t really seem to have any other than to encourage college students to fund their education by becoming indentured servants.  He also appears to have enough money to be in the fight for the long run, which could, at a minimum, be of great benefit to the winner of the Reagan Coalition subprimary.

Much will be riding on the Bush tax cut plan, whenever it is unveiled, which presumably will be before the debate.  Will Jeb! attempt to outbid Rubio by providing even greater tax cuts to the wealthy, as his business establishment backers will probably be demanding, or will he make more of an effort to help working class voters to create some ideological distance between himself and the other candidates?  I am betting on the former.  Stay tuned.

The 2011-12 Republican debates were more of a series of excommunications than a genuine exchange of opposing ideas.  Since everyone was aware of the orthodox position on each issue, the objective was to find your opponent’s heresies and beat him into submission with it.   Will that be true again in this campaign?  I would like to think not, particularly since there appears to be a greater diversity of opinion among the candidates on several issues than last time, but the intellectual enforcers within the party (Fox News, WSJ, etc.) are very strong, and I suspect they will prevail.

Given the large number of candidates, it is inevitable that all of them will try desperately to get attention by employing the sharpest and most memorable zingers they can muster against President Obama and Hillary Clinton.  It is also very likely that the group as a whole will feel comfortable taking shots at Rand Paul’s views on foreign policy.  Will any of them go further than that?  And, if so, will they have the nerve to pursue their attacks to their logical conclusion?  Tim Pawlenty’s failure to press his attack on Romney over Obamacare in 2011 is proof that half-hearted (i.e., wimpish) challenges to the leading contenders can be disastrous.

Fans of the Tour de France will note the similarities between the cluster of debaters on the stage and the peleton, which has its own enforcement mechanisms to maintain discipline within the group.  Nevertheless, someone with low poll ratings is bound to launch a significant attack on one or more of the principal contenders early in the race, because he has little to lose and much to gain.  My prediction is that it will be Ted Cruz, who has burned so many bridges with the Republican establishment, he views it as a badge of honor, and will use it to market himself to the electorate.

 

To the Republican voter, every election is 1980.  The Democratic candidate is Jimmy Carter–overly intellectual, weak, and overwhelmed by events; the Republican, of course, is Ronald Reagan.  The purpose of the primaries, therefore, is to anoint the latest incarnation of Reagan.

The new Reagan should obviously look as much as possible like the old one;  he should have a commanding presence and as much charisma as possible and be visibly free from any sort of doubt about the correctness of his ideology.  To put it in a single word, the Republican nominee has to have swagger.

Who among the candidates best meets this description?  Jeb Bush has the physical presence, but lacks Reagan’s ability to project strength and certainty.   Chris Christie and Donald Trump have plenty of swagger (it is probably their biggest asset in this forum), but a host of other liabilities.  Marco Rubio’s most memorable public moment came when he ducked off camera for a water bottle.  Scott Walker is a certified butt-kicker, but my dining room set has more charisma than he does.  Ted Cruz swaggers, but comes across as being very negative.   The others?  Forget it.

So who wins?  I don’t know, but this is a huge problem for Rubio.  I think his lack of swagger disqualifies him regardless of his other assets.