The sages do not consider that making no mistakes is a blessing.
They believe, rather, that the great virtue of man lies in his ability to correct his mistakes
and continually make a new man of himself.
Wang Yang-Ming
Debunking Clinton: "A Clear Choice"
"This election to me is about which candidate is more likely to return us to full employment."
"This is a clear choice. The Republican plan is to cut more taxes on upper income people and go back to deregulation. That's what got us in trouble in the first place."
"President Obama has a plan to rebuild America from the ground up, investing in innovation, education, and job training. It only works if there is a strong middle class."
"That's what happened when I was President. We need to keep going with his plan."
Setting the Context
First of all, the election is about choosing the right executive within the context of the Founding Father's vision of a limited national government. The federal government is properly limited to a few core systems providing for the common defense and safety, a justice system protecting life, liberty (including economic rights), and property, resolving contractual disputes and guaranteeing negative rights of the individual, a public treasury, and foreign affairs and trade.
The Progressives, for more than a century, have vastly expanded the role of government at the expense of the private sector: the government dominates the financing of home and college loans and flood insurance, it guarantees bank depositors, the building of nuclear power plants and pension funds, it provides a compulsory foundation of retirement planning for pension and health care, it has poverty support programs for food, shelter and health care, it controls much of our current highway system and key infrastructure, and it is expanding its portion of the fast-growing health care sector for an aging population.
Yet it is clear that we have an overbuilt, sclerotic, redundant, ineffectual, wasteful, unaccountable, increasingly unmanageable government, replete with morally hazardous policies (generous welfare, unemployment compensation, etc.) that encourages, even perpetuates dependence on government. It has intervened in the market and used sham rationalizations of "failed markets" (instead of failed business models) to increase its centralized scope of control.
The federal government today is accountable for almost 25% of our GDP, well above the post-WWII average of 18-20%. The federal budget has exploded to roughly $3.7T a year, almost 60% of which involves retirement and health care funding for senior citizens and the poor, nothing to do with the core mission of government. Roughly 20% goes to fund Defense and the State Department with a large military and global commitments far beyond the the intent of the Founding Fathers whom balked at the idea of a standing military and warned against foreign entanglements.
We have a convoluted tax system which is biased in favor of maximizing current consumption and against savings and investment. Among other things, it subsidizes home ownership and business procurement of "health insurance" (bundled health services, where the policyholder is not vested in frugal consumption of health products and services).
We have seen a stealth erosion of the concept of federalism, as state and local governments cede more authority of traditional responsibilities, e.g., in public education and health care, to the federal government. The federal government also uses funding with strings attached to influence state and local policy.
We have witnessed an growing erosion of our personal liberty, of privacy: the so-called "War on Terror" is used as a pretext for invasive searches--in one's communications, dignity at an airport, tracking our movements by devices or by drone, etc. The Supreme Court in the 1930's allowed the government wide discretion to infringe economic rights; more recently, we saw similar discretion in terms of our property rights through the Kelo decision.
The Congress has delegated authority to a private banking cartel, the Federal Reserve, that not only has abysmally failed to protect the purchasing power of the dollar, but has interfered with the functioning of the free markets and manipulates interest rates, instigating massive asset bubbles with easy money policies.
The government created an extensive regulatory regime, up to $1.75T a year or more, disingenuously scapegoating "laissez faire" business for problems exacerbated by government policies of housing loans, easy Fed money policies, implicit government guarantees of mortgage backed securities, and failed government regulation
A Rebuttal of Clinton
- Is This An Election of Who Can Return the Economy to Full Employment? NO
The President does, of course, make decisions affecting the economy: e.g., the appointment of the Fed Reserve chair and policies affecting federal taxes, spending, and regulations. But in any election involving an incumbent President, it focuses on performance.
Any executive is hired with certain expectations; in the public sector, this includes effective management of government operations and efficient utilization of scarce public resources, including taxes, and there are also long-term expectations in terms of sustainable operations. Clearly the first issue in the middle of one of the most significant recessions over the past century and in the aftermath of the economic tsunami was the economy. In the long term, we have to look at the national debt and off-balance sheet obligations, such as unfunded entitlement liabilities. The President also has responsibilities in foreign affairs and trade.
An elected official also sets his own performance criteria in terms of election promises.
VERDICT:
- Clearly the President has a problem: the recession was technically declared over in June 2009. The bloated stimulus package, oversold with the unrealistic promise it would keep official unemployment under 8%, clearly has not worked. Despite unprecedented Fed Reserve action keeping the real interest rate below 0% and various quantitative easing rounds, we've had the slowest, jobless recovery since the Depression. Recent drops in the official unemployment rate reflect more structurally long-term unemployed, at the highest rate in decades, no longer counting in official statistics. As of the latest job figures, Obama still remains hundreds of thousands of jobs below break-even for his term, despite the fact that the labor force expands by over 100,000 a month. The real issue: a weak-growth economy. Clearly, Obama fails on this score: he offers no real answer beyond more provably ineffectual spending and class warfare tax hikes.
- Obama has piled up the hugest debt of any President in American history. He has repeatedly shown an unwillingness to compromise on legislation with the Republicans, including landmark health and finance reforms not attracting a single bipartisan vote; even his stimulus package only attracted the votes of 3 GOP senators, one of whom would shortly thereafter defect to the Democratic caucus in a vain attempt to save his Senate career, given an all-but-certain loss in the GOP primary. He refused to work with the majority plan submitted by his own bipartisan deficit reduction commission, we have seen the first credit rating deduction on American debt in US history, the Democrats used chronically underfunded Medicare to subsidize their ObamaCare program, and we have an unsustainable $44T+ unfunded entitlement liabilities. He badly handled the debt ceiling crisis.
- Obama not only did not improve on Bush's withdrawals from Iraq and Afghanistan as promised, but the majority of fatalities in Afghanistan have occurred in his single term (and counting). We have been deeply involved in the consequences of the Arab uprising, often without the consent of Congress, and Obama was widened the areas of drone attacks. In terms of trade policy, Obama has been disappointing, only recently approving 3 trade pacts pending long before the end of the Bush Administration
- As for Obama's promises beyond foreign policy, we've clearly seen a number of unfulfilled commitments, notoriously the Gitmo closure, immigration, the class warfare tax hike, climate change, and a post-partisan Washington DC.
- Ignoring whether full-term employment is the key issue, is Clinton right that Obama is the better candidate to deliver on that promise? NO
First, all Obama is promising is a rehash of the same policies that have not worked to date, and a second term would be with a Congress where the GOP is in a far stronger position; second, Obama has almost zero credibility with the GOP Congressional leadership. I find it hard to believe that Obama could possibly be reelected with 2 of 3 American voters thinking that the country is going in the wrong direction; the buck stops at the Oval Office.
I think the best--and only way--for this economy to return to growth (and then full employment) would be to take a measured step towards restoration of a free market. I think uncertainty about the federal budget--how many resources Obama is stealing from the far more productive private sector--and tax policy, not to mention the uncertainty over the new federal healthcare and reform laws, will continue to drag the economy under Obama. Obama has all but ignored the supplier side of the economy, and his policies of punitively taxing the economically successful adversely affect economic growth. Even if Obama was successful in hiking taxes, it will shift investment away from riskier stock investments and adversely affect a key source of discretionary spending. Moreover, Obama's failure to control spending is playing with fire: sooner or later, the Treasury is going to find out that it's run out of buyers to service the debt at artificially low interest and will have no alternative but to increase interest rates. Even a restoration to more normal 5% Treasury rates will add perhaps half a trillion to the national debt on its own.
Romney will likely not do what I would do, but there's no question: (1) he will not renominate Bernanke, (2) he will work with Congress to do what Obama has failed: to make progress on tax simplification, a more globally competitive tax rate, slash spending and make long-overdue reforms of entitlements; (3) he will repeal or roll back excess regulation.
- "The Republican plan is to cut more taxes on upper income people and go back to deregulation. That's what got us in trouble in the first place."
Clinton is lying. The GOP is opposing RAISING taxes, not just on upper income but across the board; a tax hike would result from the expiration of the Bush era tax cuts. By extending the Bush era tax rates, the GOP is not "cutting" taxes but maintaining the status quo.
"Deregulation is what got us in trouble in the first place?" No--what got us in trouble was bubble-exacerbating progressive policies, such as those promoting home ownership (including subsidies for mortgage interest and targeting politically favored criteria beyond credit-worthiness), guarantees for the MBS of the GSE's and delegated loose monetary policy. What was worse were the interventions to save certain companies under the morally corrupt concept of "too big to fail".
No, heavy-handed financial reform does little more than transfer key financial transactions to financial centers other than New York, certainly not to the advantage of the US and jobs in the financial services industry.
Obama would have sped process towards economic recovery by letting the market absorb business failures rather than deferring the day of reckoning. Each step of his market interventions obfuscated the economy. He also bears responsibility for the unforced error of renominating Bernanke for a second term.
- "President Obama has a plan to rebuild America from the ground up, investing in innovation, education, and job training. It only works if there is a strong middle class."
These are just code words for intervening in the economy, picking winners and losers, exacerbating the college cost bubble, and subsidizing business costs (job training). Obama has already tried to do these things, and they have failed. It has always been the private sector, not the government, that grows the economy. It doesn't need government bribes with strings attached. The central planning methodology of progressives is hopelessly inept and sclerotic in dealing with the dynamism of the real economy. Our strongest growing economy occurred at times when the government tax and regulatory burden was a fraction of what they are today. Unfortunately, the Democrats have not learned from the lessons of history and are doomed to repeat the policy mistakes of FDR and others.
- "That's what happened when I was President. We need to keep going with his plan."
No, the last thing we need is delusional, megalomaniac central planning. We have seen this lesson several times before, notably in the economic collapse of the former USSR. You cannot manage innovation; innovation occurs despite government, not because of it; it thrives most readily in a vibrant free market. The way you enable new businesses (or existing businesses to expand) is by eliminating crony-oriented barriers to entry or exit, disable meddling regulations in the workings of business, etc: let the free market be the free market. You and Obama try to pick winners and losers; that's totally on its head. THE CONSUMER DETERMINES WHO WINS AND LOSES, NOT THE GOVERNMENT. So, no thank you: if the American people really believe that Obama's agenda will work, they are sadly mistaken. I'm ABSOLUTELY CERTAIN that doing EXACTLY THE OPPOSITE of what Obama wants to do is the first step to meaningful recovery.
Oh, and by the way, Clinton: you benefited from the end of the Cold War, a stingy GOP-led House of Representatives and a massive Internet economy bubble that was unsustainable. You didn't bother telling the folks that many of Obama's early economic advisers were veterans of YOUR administration, and they didn't help, did they?
Political Potpourri
First, Scott Rasmussen released a poll earlier this week suggesting nearly half of voters rate the President's "leadership" as "good" or "excellent". OH, MY GOD! If this is true, nearly half of the American voters are in a state of denial. Most likely, there is some massive halo effect where people are confounding personal popularity or political support with the concept of "leadership".
Fortunately, we don't have to rely on subjective measures when it comes to leadership. We have the reality of the most politically polarized Congress ever, and Obama has been part of the problem, not its solution. He has not backed Simpson-Bowles, he has not come forward with a problem to fix social security and Medicare, he has done nothing to balance the budget (the only things he discusses are budget gimmicks, almost a decade from now when he'll no longer by President). He has constantly blamed his predecessor instead of accepting responsibility for his lack of performance in his term, and his handling of the debt ceiling crisis (see the earlier reference of Woodward) was abysmal. He has not submitted a viable budget.
The Rasmussen poll reminds me of some past teaching evaluations, where they admitted learning a lot in my course and then rated me low: it reflected more my unpopularity than my effectiveness.
Second, there is something really strange going on with the Obama/Romney polls, and I'm not sure how to interpret it yet. It looks as though if anyone got a bounce from the conventions, it's Obama. I haven't even read his speech yet, but COME ON! Gallup is showing a 52% approval rating--with a listless economy? I think Obama was at 42 or 43 like a week or two ago. I think it's just a temporary bounce and a fluke. The only thing that has occurred has been the convention. Even Rasmussen has seen a 4-point Romney lead swap to a 3-point lead by the President.
There are some other troubling notes, including signs that Romney is not putting money into Michigan (I still haven't seen my first Romney ad in Maryland). I'm not watching local, but the only thing I've seen on cable over the past week or so is the Clinton ad I debunk above. Now I do have an intuitive feeling that the polls are overstating Obama's strength, but I don't think that the Romney campaign can or should rely on my intuitive feeling (I have no doubt that others would regard it as a wishful feeling).
I need to see something from the Romney-Ryan campaign to go beyond red meat politics, redoing the applause lines for the base. Their problem is not the base, which is super-motivated to vote out Obama. I'm not part of the base, and I've been waiting four years to vote Obama out of office.
I'm worried that the Romney campaign is hoping that the debates will be their opening. (I think Obama will be prepared; Romney needs to tag Obama in their exchanges, but I haven't seen Romney do that in debates to date.) I want to see a new wrinkle, something unexpected that puts Obama and his campaign on the defensive. I think it's widely recognized that Romney's speech didn't measure up, and I'm not sure how they didn't know that: usually these themes are sounded out in focus groups and the like. Yes, I think Romney did improve his perception by women, but he's not connecting. He's not getting it. It's not enough to say he'll work his heart out for the American people. He's got to come out and make the issue not so much about him but of the failure of Progressive politics--overpromising, underdelivering, underfunding. Neglect of our infrastructure, passing on the bills or problems to the next generation. I don't want him delivering nuanced answers: I want to hear him from the hilltop, saying: "Under my administration, we will cut budgets to the point that lobbyists will start screaming. No accounting gimmicks--we will kill programs and lay off bureaucrats not interfacing with the public. We will get our men out of Afghanistan, sooner than later. Our tax policies will be competitive with other nations'." I want to see and hear passion about ideas. As long as Romney tries to make this election about who has the better resume, he may very well be right, but the people know and like Obama: Romney is not going to win a popularity contest. He needs to let independents and moderates know the choice is not personal, but substantive--and be more specific about reforms, policy differences, etc. How would he have been President over the past 4 years? What would have been different?
Finally, I didn't say anything at the time, but Romney, in my judgment, didn't handle Ron Paul at the GOP convention very well and reportedly refused to let his name to be put into nomination. (Other libertarians are far more strident and angry about it.) Reportedly they didn't want to do that without assurances that Ron Paul would directly endorse Romney. Big mistake, especially after Rand Paul endorsed Romney and faced virulent attacks by his dad's own supporters. Yes, Rand Price was given a slot, but common sense tells you that Rand Paul will probably inherit his dad's supporters, and Ron wouldn't do something to undermine Rand's political future. What the Romney people did was politically stupid: you give the man a few minutes to express himself on the biggest stage at the end of his political career.
To be honest, if Mitt Romney adopted Ron Paul's positions, I think he would win the election in a walk. Ron Paul was the most consistent conservative of any candidate and he has significant support among Democrats, independents and moderates. I like Romney for President, but Ron Paul has my heart. I didn't know about all the drama going on at the conference. When I saw the Ron Paul video package, tears came to my eyes. I was sure Ron Paul would come out and give a speech, and I would have been cheering. And then Mitch McConnell came out and I was confused: is he making an introduction for Ron Paul? I can tell you that I felt cheated, and Rand's talk wasn't enough to mollify me. (I prefer Ron Paul as a speaker.) If I had a role at the 2016 GOP convention, my keynote speaker would be Ron Paul.
Musical Interlude: My Favorite Groups
Roxette, "Fading Like A Flower"
