Not Makers and Takers, Just People

One theme that emerged from this most recent election (and from the comment section of this post) is that the American electorate is divided into two categories – the makers and the takers. This being embodied by Mr. Romney’s “47 percent” comment (those who pay no federal income tax) and his post-election comment about President Obama’s victory being the result of him promising gifts. Fox News agreed with this line of thinking, which prompted Bill O’Reilly to say half the country just wants “things.”gifts

Where I disagree with Bill O’Reilly is that he believes only half the country wants “things” – the whole country does. Every single person wants some “thing.”   The nation isn’t made up of makers and takers – it’s made up of HUMANS. Take any Econ (micro) 101 class and at the core is the basic principle that people act out of self-interest. People make decisions to maximize utility, or as I had one Professor put it, “People make decisions to make them happier.”

It’s not that we have a nation of have’s and have not’s or makers and takers; we have a nation of people. People who want to maximize their wellbeing. So it shouldn’t come as a surprise when people vote in their own self-interest. Women, Hispanics, and the youth tend to vote more Democratic because Democratic ideals and principles align more closely with their self-interest. Conservatives can say Democrats are in the business of giving away gifts, but this same practice goes for Republicans as well.

The wealthy, the ones who vote Republican, are voting in their own self-interest. The Republican Party is committed to lowering taxes on corporations and top earners. They are committed to fewer environmental regulations. And they are committed to rolling back financial reform. All these are gifts to many Republican donors and voters. It’s pretty simple; both parties offer “gifts” – then the people vote accordingly.

The right doesn’t see it this way though because they believe their model is not just about helping the rich; they believe their model will benefit everyone – that wealth trickles down. It’s a convenient way of thinking, but it’s disconnected with reality. Taxes are at all time lows and have been on the decline since the 80’s, yet we’ve seen no economic boom, only an increase in income inequality. Lax environmental regulations have contributed to an increasingly warmer planet. And dismantling regulations like Dodd-Frank would get rid of the one piece of legislation attempting to prevent another financial collapse.

Republicans like to believe Democrats want people to stay reliant upon the government, which is why the left is usually more in favor of expanding the safety net. However, unlike the Republican model, the Democratic model has historically been successful. Democrats believe in the idea that wealth and prosperity do not stem from the rich or the ‘job creators’; they believe it starts with the average worker. And contrary to a lot of conservatives, this isn’t liberal dogma or some high-minded moral sentiment, it’s actually economically backed. Economies operate on simple supply and demand. As overall demand (or aggregate demand) increases the economy responds and grows.

Demand starts with the many, not the few. It starts with the average person spending their disposable income on goods and services. So in times of recession when people are out of work or their hours are cut, they have less disposable income and the economy slows. This is where government can help, it can step in and provide people with income assistance to not only ensure people can survive, but to actually help get the country out of its slump. It was government spending that got us out of the Great Depression, and although Republicans will disagree, economist are pretty much in agreement that Obama’s stimulus helped in this recovery. So it’s not that Democrats want people to stay reliant upon government, rather, Democrats realize government can help; government can do good.

The right can say Mr. Obama gave people gifts, but it’s no different than when Republicans offer gifts to their supporters. The only difference being that Democrats’ gifts have to lead prosperity in the past while the Republican gifting model has only lead to sharp income inequality, lackluster economic performance, and oh yeah, all those tax cuts that have done nothing but contribute to our debt.


Why the Economy Doesn’t Matter

Okay – obviously it does. We still have weak economic growth, high unemployment, and a lack of consumer confidence. However, as Keynes pointed out decades ago, and as Paul Krugman recently referenced, due to “use, decay, and obsolescence” economies eventually fix themselves. Basically, as products, machinery, or equipment grows old, breaks down, or becomes obsolete – it needs to be replaced. This means businesses and individuals start buying more products, and the economy returns itself to normal.

I bring this up because so often the question in the Presidential race is who is best suited to fix this economy. Not to say this issue shouldn’t be addressed, but it overshadows so many other issues. Since we are in a recession, we as a country forget there are other problems and issues a President must address.

The United States is facing an education crisis; our standing on the world stage continually dropping. Not to mention there are underfunded and understaffed schools across the country.  Both sides have offered little more than campaign platitudes, and good feeling rhetoric like “Hire more teachers!” In fairness to the President though, he does have his Race to the Top initiative, which focuses on increasing funding for k-12 education. (He did a terrible job communicating details of the plan during the debate) Similarly, Democrats have been trying to increase funding for Pell grants, and are working to  keep interest rates low on student loans. Conversely, the Ryan plan slashes education, including cuts to programs like Head Start and Pell grants. Also, we have seen Republican Governors attempt to balance their budgets by getting rid of teachers and other public employees.

The next President is also likely to make two Supreme Court nominees, which means whomever wins this election, his stance on social issues will have a greater bearing on policy than normal. This is troubling, especially considering we have absolutely no idea what Mitt Romney actually believes on the issue of abortion, and in the debate, Paul Ryan hinted he would be in favor of overturning Roe vs. Wade. Furthermore, as state courts contemplate the issue of gay marriage, it is only a matter of time before the Supreme Court weighs in. Yes, jobs are important, but it is also important that women continue to have the right to make decisions about their body, and it is also important we work toward giving all persons equal rights regardless of sexual orientation.

Finally, as I’ve argued before, the greatest threat to this country is not the debt, it’s not China, and contrary to many Catholic groups, it’s not gay people – it’s climate change. Climate change not only threatens the lives  of people across the globe, but it has and will continue to devastate the world economy. The longer we wait, the more expensive it will be to fix, and the harder it will be to reverse. Addressing climate change will be the single most difficult task our country has faced. Not because we don’t know how to fix it, or it’s a problem on too big of a scale to solve – it’s because one of the political parties doesn’t even believe it exists. Even though the scientific evidence is overwhelmingly in support of climate change, the right insists it must be a left-wing conspiracy.

So as election day nears, remember, this country faces more challenges than just the economy. They are challenges of a type that being a businessman doesn’t automatically qualify you to address. As voters we should elect a President who believes in funding the eduction of future generations, not cutting it in the name of fiscal responsibility. We should elect a President who believes in protecting the rights of women and extending equal rights to all persons, not suppressing individual liberties to cater to the extreme wing of the base. And although both parties have stalled on the issue of climate change, for God’s sake, we should elect a President who sides with the scientists (and the rest of the developed world for that matter) and recognizes the threat is real, not one who believes the entire scientific community is pulling some giant prank.

P.S. I also believe Obama is better suited to fix the economy – See here, here, here, and here

The Troubling Aspect of Romney’s VP Pick

When Congressman Paul Ryan of Wisconsin got the nod as Romney’s running mate the question became what does he bring to the ticket? VP’s are chosen for various reasons. They can fill in the Presidential candidate’s weak spots like Cheney did for Bush. They can add a nice contrast to the Presidential candidate like Biden did for Obama.  They can excite the base like Palin did for McCain. So what does Ryan do for Romney?

Well, Ryan doesn’t help with the healthcare debate. Romney has always struggled on this issue because he was the original architect behind the idea for ‘Obamacare.’  This prompted Rick Santorum to say Romney “would be the worst Republican in the country to put up against Obama.” Adding Ryan to the ticket may distract from that particular point, but not the healthcare debate in general. Ryan wrote the plan that “would change Medicare as we know it.”  His plan to replace Medicare with a voucher system that on average would cost seniors $6,400 more a year has received criticism not only from the left, but from senior citizens’ groups as well. So Ryan may take some heat off Romney’s record in Massachusetts, but he replaces it with a new wave of attacks.

Ryan also doesn’t help with the perception that Romney only cares about the wealthy. Ryan may not be an east-cost millionaire with multiples homes, Swiss bank accounts, and a dressage horse, but his proposals sure seem to help people like that.  The Ryan plan, like Romney’s plan, is filled with huge tax cuts for the wealthy that are somehow paid for by closing (yet to be specified) loopholes. Realistically, the only way to pay for those tax cuts is to close loopholes that benefit the middle and lower class like the home mortgage interest deduction and the earned income tax credit. His budget also cuts Medicaid (even more than Medicare) and other programs geared toward helping the less affluent. Whether you agree or disagree with Ryan’s plan, it’s hard to argue he is someone who represents the middle-class.

Another problem Romney has is his inability to seem, for lack of a better term, human. He is awkward on stage and in interviews, and just does not seem comfortable as a politician.  Ryan should help a little with this, as he is a career politician. But in reality, Ryan is more of a policy wonk than an everyday guy. He’s a technocrat that is good at explaining his position. So he may make Romney seem relatively more personable, but in no way will it be a big factor in the election.

In a lot of respects Ryan does very little for Romney. But Ryan does one thing for Romney that should frighten everyone.

The one thing I believe Ryan does for Romney is he will without a doubt sure up a base that was once skeptical of Romney. That’s troubling.  Ending Medicare, slashing Medicaid, and drastically reducing the size and scope of government are all concerns of mine; however, I am more concerned that those problems will be amplified due to Ryan’s unabashed support from the extreme right-wing of the Republican Party.

By choosing Ryan, Romney strengthens a base that is increasingly moving further and further to the right. Ryan strengthens a base that puts ideology before facts, preconceived notions before reality, and flawed beliefs before the truth. He strengthens a base that has created such a huge divide in this country that moderates no longer exist and compromise is a dirty word. Ryan will sure up a base whose policies if actually implemented will change American society for the worse. The idea of a second chance will no longer be embedded in American culture, but rather become analogous with socialism and a society dependent on government. Ryan will sure up a base that wants to cut any and all government programs, restrict access to healthcare, and send the economy into a tailspin; all in the name of what they consider fiscal responsibility. He gives credence to a base that believes freedom itself stems from lowering the national debt – no matter what that cost is to the average American citizen.

The consequence of giving those ideals a national platform and a credible voice is frightening in an election, which could be heavily determined by base turnout.

Mitt’s Plan – Tax Cuts for Everyone! If You’re Rich

The election cycle thus far has been one of very little substance – on both sides. It has been attack ads, mixed with vague claims about how to solve the country’s economic woes. This trend only continued when Governor Romney released his plan for tax reform. Like the Ryan budget, it consisted of large tax cuts supposedly paid for by closing deductions and loopholes, and broadening the base.  It is also intended to be revenue neutral; however, Romney gave no specifics on how he plans to accomplish any of this. Since Romney is silent on the issue, the non-partisan Tax Policy Center filled in the details.

The findings of the study, generally speaking, are the tax cuts for the rich are so big that the only way to make the plan revenue neutral is to raise taxes on the middle and lower class. The graph below (from the Tax Policy Center report) shows the percent change in income after taxes for various income groups. Basically those making below $200,000 a year, the vast majority of Americans, will see an increase in taxes while those making above $200,000 will receive a tax break. Further, those making above $1,000,000 a year will see there after tax income rise by 4.1 percent. It is another reverse Robin Hood tax plan with which conservatives seem so enamored.

Team Romney has dismissed the report claiming liberal bias, even though every effort was made to be unbiased including a few generous assumptions. For example, the “Note” at the bottom of the graph explains that to be as progressive as possible all deductions and loopholes were closed entirely for the wealthiest first. However, in order for the plan to remain revenue neutral those deductions and loopholes had to be closed for lower-income people as well.

Although the study tried to make the plan as progressive as possible the result is still incredibly regressive. This is frightening because if Romney happens to win, and this plan goes into effect, there is no “as progressive as possible” guarantee. Meaning the cost of the massive tax cuts for the wealthy could be even more burdensome for the middle class than what is projected. This coupled with the right’s constant demand for spending cuts, which adversely hit low-income individuals, makes the Romney plan a serious threat to middle class growth while benefiting only people like Mitt Romney.

Hooray for fiscal responsibility.

You May Have Built Your Business, But You Had Help

For the past couple of weeks the Romney camp has been bombarded with new attacks about Bain Capital, along with an unrelenting demand for more than just one year of his tax returns (this is coming from both the right as well as the left). Needless to say, not a great few weeks for Team Romney. However, it appears Romney thinks he may have found some political ammunition with which to fight back.

Recent remarks by President Obama, at a rally in Virginia, left conservatives salivating at the political fodder delivered by the President. The right-wing ‘blogosphere’ has had a field day with the President’s line, “If you’ve got a business, you didn’t build that.” Conservatives are using these remarks to reinforce their line of attack that Obama doesn’t understand how the economy works, and they’ve even gone so far as to call him un-American. (See John Sununu)

Now, before I go into my usual Republicans are wrong, and have no idea what they are talking about spiel, I will say the President could have been a little more eloquent with his choice of words. Small business owners do have to work incredibly hard, and they do have to take risks, which are not inherent to other careers.

But… that does not mean what the President said was wrong. A little context needs to be added. The backdrop of this past week and half or so has been a discussion about taxes, specifically; ending the Bush tax cuts for the top income earners – or, in many cases, your business owners. The President has been asking for their tax breaks to end in part to address growing deficits, in part to hinder the burgeoning divide between the rich and everyone else, and in part to bring back tax rates to more historical norms when job growth was much stronger. But, it is mostly to ensure the top earners in America are paying their fair share.

And that’s the issue here. It’s not that the President is un-American, quite the contrary. The majority of the twentieth century marked an era where there was an understanding in America, a sort of social contract, that every person should do their part in making America great. This meant higher earners paid higher taxes. No one said this was socialism or the destruction of America, but rather ensuring the American dream stayed alive. It was for this reason we saw top marginal tax rates during this era close to 80 percent, a number unfathomable in politics today. There was a belief, which is true, that if you are successful it was made possible by the help of a lot of other people. So it only made sense for them to pay a little more in taxes.

That attitude changed though. We went from a society where the very wealthy paid their fair share, to a society of Gordon Geckos, a society where greed was believed to be good. We became a society where the wealthy no longer used their wealth to create a better country, but used it to grow their own bank accounts. Their influence went to creating a tax code filled with loopholes and deductions that disproportionately benefited themselves. It went to deregulating businesses at the expense of people and the environment. It went to creating a financial sector where risk was taken off of the investors and bankers, and put onto the average person. We became a country centered on making the wealthiest members of society even richer.

And this brings us to today; where the mere mention of business owners and job creators paying a little more in taxes is wholeheartedly rebuked and deemed as socialism, and to imply that successful people received help from the government is an attack on America itself. When in reality they did have help, and they should pay more. Job creators, like most of us, went to a public school or hired someone who went to a public school, which are paid for by taxpayers. They drove on roads and bridges built by public funds. They most likely advanced their business through the use of the Internet, which was created with the help of government research. (By the way, these are all points the President mentioned in his speech. Shocking – Romney took the line out of context.)

The point is that business owners are successful in part because of people and the government. It is for that reason they should pay higher taxes. Sure, job creators created their businesses, but they didn’t do it alone. In fact, they had a lot of help, whether they want to believe that or not. So it’s not socialism or class warfare to ask the rich to pay more – it’s American.

Running a Business Doesn’t Qualify You to Run an Economy

There has been a lot of discussion about the new Obama ad, “Steel”, attacking Mitt Romney’s tenure at Bain Capital. The ad portrays Romney as a heartless capitalist pig who destroyed lives and killed jobs.  Republicans have criticized the President for the ad claiming he doesn’t understand capitalism. They de-legitimize it by saying for every negative story about Bain there is a positive one as well.  Meanwhile Democrats view the ad as highlighting the problems of capitalism.  Although I have written before about the pros and cons of capitalism I think this is a completely separate issue. I think both sides are wrong.  The ad is not about capitalism.  However, the ad is effective and legitimate for another reason.

Romney’s whole message is that he knows how to create jobs. He’s the businessman candidate who is going to take his business world experience and translate that into running the government and the economy.  Here’s the problem, (and here’s why the ad is effective) running a business and running an economy is completely different.   Successfully running a business means finding ways to cut costs, and increase profits.  Successfully running an economy means achieving full employment with consistent GDP growth. Cutting costs doesn’t lead to full employment though; it actually leads to the opposite. When Republican governors across the country came into office and decided to run the government like a business and reduce spending (cut costs) we ended up with massive lay-offs of teachers, police officers, and firefighters – not good for a struggling economy.

Similarly Bain cut costs but did so at the expense of the employees.  And although Bain had success stories, the job creation was just a product of making the business more efficient and cost-effective. Running a business is not about job creation it is about the bottom-line, which is fine, it’s just not ideal for an economy, especially one with high unemployment. The point is that many of the practices of a successful business would be detrimental if they were carried over to an economy, like that of cutting costs to boost growth.

So the takeaway from the ad is not that capitalism is bad, or Romney is some fat-cat.  The takeaway is that being a business person, and owning and operating a business does not qualify a person to run an economy. Running an economy and running a business are categorically different. Trying to run an economy like a business is not only misguided, but irresponsible.

Romney – Just an Awful Politician

You may hate Romney, you make like Romney, (I venture few love him), you may think he’s a good businessman, you may think he’s a capitalist pig, you may think he’s a Massachusetts moderate or you may think he’s truly conservative, but there’s one thing he truly is; just an awful politician.

Never mind he has flip-flopped on almost every issue (did he learn nothing from John Kerry?) and never mind he continually panders in the most obvious ways to every state he visits (“I like grits”, and “the trees are the right height”), and never mind he has put Vice-President Biden to shame as the gaffe king (“I don’t care about the very poor”); never mind all that, I want to talk about his most recent statement.

The one where he says this: “I keep hearing the president [Obama] say that he’s responsible for keeping America from going into a Great Depression, No, no, no. That was President George W. Bush and [then Treasury Secretary] Hank Paulson that stepped in and kept that from happening.”

This statement is not totally inaccurate, but it is so politically dense. By crediting Bush for keeping America from going into a recession he is in effect crediting the Wall Street bailout as not only good, but also a positive force in this recovery.  Whether it is or it isn’t, is irrelevant, it’s widely unpopular with the public. Meanwhile, Romney has been a staunch opponent of the auto bailout. Romney, who is already viewed as a Wall Street fat cat, is now saying bailing out rich bankers equals saving America and bailing out the average middle-class worker equals the demise of America.

Also, does he think bringing Bush back into the conversation is a good political move? The name still puts a sour taste in the mouths of people across the political spectrum.

Like I said, you may like Romney, but he’s just an awful politician.


You Must Actually Teach the Man to Fish

I frequently get in conversations with conservatives who constantly gripe about government handouts, believing the welfare system is what is wrong with this country.  It is people not wanting to work and expecting government to just bail them out.  When I get in this discussion with Republicans they always bring up the clichéd line “give a man a fish and he eats for a day, but teach a man to fish and he eats for a lifetime”, basically saying government handouts will never bring prosperity to people who depend on them.   Now I do not whole-heartily disagree with this and I think it is a wise saying.  However, for the line to actually make sense the man must actually be taught how to fish.  I think it is incredibly hypocritical for Republicans to denounce welfare, and at the same time be anti-education, in both rhetoric and policy.

Mr. Santorum called President Obama a snob because he wanted every person to have access to higher education.  “What?” College graduates on average earn far more than those who do not graduate from college and the unemployment rate for college graduates is 4.2 percent (compared to 8.3 percent for those with only a high school education, and 12.9 percent for those without a high school diploma). Now I know college is not the right option for every person, but it is not snobbish to want every student to become better educated.  Similarly Mitt Romney told a high school student to go to a school that is cheaper and not to expect government to help pay for his loans.

Instead of telling students to settle for a cheaper school why isn’t he encouraging reform to keep tuition rates low and to make college affordable to all students who wish to go on to higher education?  Mr. Romney seems to forget this country was made great because we invested in education.  America started the “high school movement,” which made secondary education standard. It also passed the GI Bill, which led to a generation of college-educated individuals.  Government worked to make education a priority.  In 1979 Pell Grants covered 77 percent of the costs of tuition at public universities that number is now down to 36 percent.  This is due to skyrocketing education costs and one political party that argues we must cut spending at all costs. Is it any wonder America is no longer the pinnacle of education?

Republicans curse those on welfare for not helping themselves while de-funding education and regarding it as snobbish. Education is precisely the means people need to help themselves.  Yet they talk about education as if it was toxic, they want to cut Pell grants, and they scoff at the idea of government intervening to help.  Republicans want to cut both welfare and education; I just don’t see how that will make anyone better?

Numbers and Voters and Polls, Oh My

After a poorly organized and lack luster voter turnout in Nevada Mitt Romney was deemed the official winner early this morning. Mr. Romney easily took the state with 50 percent of the vote but few see this as a strong signal for the Romney campaign.  Although the Republican primary is looking like a one-man race Mr. Romney’s chances in November are looking bleaker than ever.

It appears the enthusiasm for Mr. Romney is waning and if he does nothing to turn this trend around it is unclear if he will inspire enough voters to come out for the general election.  The first three primary states did have greater voter turnout this time than in 2008 but both Florida and Nevada saw sharp declines.  1.6 million Floridians showed up to the polls this year, which is down from 1.9 million in 2008.  With Florida being a key swing state, a poor voter turnout is good news for President Obama.  Voter turnout in the upcoming states will give us a better idea if there really is a lack of enthusiasm in the Party.

Voter turnout in the primaries may only be a small indicator for the general election but recent polls also favor the President.  The most recent Washington Post general election poll has Mr. Obama at 51 percent and Mr. Romney at 45 percent.  Those numbers only increase in favor for the President when he is matched up against Gingrich.  Also the President’s approval rating has increased to 50 percent.

This along with the better than expected jobs report, which came out last week, are all indications that Mr. Obama will win a second term.

Another Gaff, Or was it?

The 24-hour news networks have loved Romney and his weekly gaffs. Each week it’s something new it’s telling a crowd corporations are people or making a 10,000-dollar bet with Rick Perry or in a prepared speech saying he enjoys firing people or his most recent gaff of explaining why he doesn’t care about the poor. I understand they are just quotes and somewhat taken out of context but they all have a similar message.  All his gaffs are related to income and the growing divide between the rich and the poor.  This is why he has trouble connecting with an audience. This is why he is not relatable to the average American. He doesn’t understand who actually needs help in this economy.  He doesn’t understand the hardships faced by the average person in this recession. Further, his ideas and policies are not geared toward easing the pain felt by those people. I find that problematic. If Romney continues making these “gaffs” I’ll begin to wonder whether or not they are actually gaffs.