New South Politics

Right now no one really knows how things are going to play out in late February when the debt ceiling and sequester cut deadlines approach, but the White House and Congressional Democrats cannot allow the GOP to define the terms of the deal.   Plus we still haven’t seen any specific policy details from the GOP that would lead to significant entitlement savings, simply raising the eligibility age on Medicare won’t lead to material cost savings.   What truly needs to happen prior to late February would be for the Senate to pass filibuster reform thus providing them with the capability to function as the primary legislative body, and enabling the White House to work future deals through the Senate by essentially marginalizing the House Tea Party members.

We need the Senate Majority leadership to make Senate filibuster reform the primary legislative goal early in the 113th Congress so that the world economy will not continue to be held hostage by GOP brinksmanship tactics primarily used to extract entitlement program cuts.  The country cannot and should not allow the House GOP’s minority to de-legitimize the federal government to the extent that it causes undue economic harm.

House Republican dysfunction is due in large part to our Congressional re-districting procedures or more bluntly the GOP gerrymandering.   Democratic US House candidates nationwide would have to win the popular vote by an average of 7% to regain US House majority based on how the district lines are drawn right now.   North Carolina’s Democrat US House candidates won 51% of the state popular vote but control just 27% of the House seats.   Republicans are electing radical right-wing ideologues to Congress who believe that the less the government does, the better.   The “do nothing” 112^th was seen as a big success by conservatives because they blocked much of President Obama’s agenda and passed very few legitimate and constructive bills.   Furthermore, they are forced further to the right in their legislating with no desire to compromise in order to avoid being primaried by even more extreme conservative challengers.  

The best way forward in repairing the flaws of the legislative process is to resurrect the Senate via filibuster reform allowing crucial legislation to pass the Senate, thereby exploiting the growing rifts among House Republicans.   It’s obvious that the majority of the House Republican caucus may not be bluffing over the debt limit, but a majority of Senate Republicans are.   In some ways the House GOP has taken themselves out of the game, guaranteeing that they will not play an instrumental role in shaping future deals, but if given the opportunity then they can still prevent the necessary votes for bills to pass and even deny a vote from taking place.  However with Senate passage of the McConnell amendment without threat of filibuster, there will be enough House Democratic support where bills can be passed at the 11th hour with a simple up-or-down vote with unified Democratic support and a caucus of moderate blue state Republicans.    Under this scenario, Minority Leader Pelosi may become more influential in the 113^th Congress than Speaker Boehner… Who knows?

Looking back and analyzing North Carolina voting results in 2008 vs. 2012, it is important to note that President Obama’s vote amounts were lower in 68 out of 100 NC counties this year than in 2008.   For all of the Obama campaign’s ground game in North Carolina, Gov. Romney outperformed John McCain by 145,000 votes and President Obama’s total NC vote count only increased by 34,000 over 2008.   President Obama did not even post large gains this year in heavily Democratic counties of Durham, Orange, & Mecklenburg from 2008. 

Also, Gov. Romney did win over 70% of the vote in 15 rural, mostly white evangelical counties including Carteret county where he won 71% of the total vote.   But these rural counties have always voted heavily GOP.  Romney outperformed McCain in nearly every NC county… with his largest increases in suburban counties of Brunswick, Chatham, Franklin, Iredell, Johnston, Mecklenburg, Randolph, Union, and Wake counties.  

It seems to me that the biggest reason why Gov. Romney won North Carolina was that he outperformed John McCain with suburban voters.   There are really small increases for Romney in most of the heavily evangelical rural NC counties, Romney did not really outperform McCain by significant amounts in NC rural counties at all.  While President Obama increased his actual vote count in Mecklenburg county by 17,000 over his 2008 total and he increased his actual vote count in Wake county by just 14,000.   Those are not overly impressive numbers in two fast-growing counties, we must have seen many 2008 Obama voters switching to Romney or the actual Democratic turnout was relatively flat. It would have been tough for President Obama to beat his 2008 results by large margins, but Gov. Romney evidently did and that made the difference.

Consensus appears to indicate that Gov. Romney’s centrist pivot in the first debate attracted a lot of moderate, suburban, undecided voters and is what allowed him to squeeze out a narrow 2% win in NC.   Also, Romney campaigned heavily in North Carolina and spent significant resources here to attract swing voters which McCain did not (could not) do in 2008.   The Christian Right does not have as much sway in major NC elections anymore and the results from this election prove that North Carolina  is moving closer towards being a pure battleground state.

The proposed Defense cuts as part of the sequestration are not actual budget cuts at all, rather they are reductions in the annual growth rate of the Pentagon’s budget.  These proposed reductions would basically maintain the Pentagon’s budget at current levels and the effects on the cuts would be minimal as we draw down from Afghanistan.

Secondly, the payroll tax cuts look likely to be history at the end of the year.  There also has been some speculation that Congressional Republicans will compromise on allowing the Bush tax cuts on the top 2% of earners expire in exchange for other budgetary concessions from Democrats.  In reality, the new taxes under the Affordable Care Act and the Alt Min Tax are already negating much of the Bush tax cuts on higher earners to begin with. 

In reality, the only detrimental effects on economic growth from the “Fiscal Cliff” would be allowing all of the Bush tax cuts to expire in addition to the expiration of the payroll tax cuts.   This is very unlikely to happen, unless they allow all rate cuts to expire at the end of the year and then cut them again retroactively.  

The CBO projects 12 million new jobs created over the next four years, with the caveat of the U.S. getting our fiscal house in order.  Allowing some of these sequestration cuts to happen would create minimal short-term economic impacts while reigning in our long-term debt problems.

Read More: The Fiscal Cliff Opportunity by Bruce Bartlett @ NYT Economix blog

We have all seen the infamous Romney fundraising video highlighting the disdain for the 47% of Americans who do not pay any federal income taxes.  We have all heard this line before from our Republican friends and family members.  Has it ever occurred to Conservatives that the top 53% of earners who carry the federal income tax liability earn a 93% share of the nation’s GDP?   This country, as well as every other developed economy, have always held the long-established belief in progressive taxation.   Higher earners are responsible for a larger share of the income tax liability because they have a greater propensity to pay these taxes, in addition to the fact that these higher earners have more to benefit from the government outlays that these taxes ultimately fund. 

Capitalism cannot coexist within a democratic society without wealth redistribution administered by progressive taxation.  Of all of the benefits of capitalism, one of the opportunity costs of this economic system is that it creates vast inequalities in wealth distribution.   Large wealth inequalities within a society create economic inequalities and lower upward mobility for all people, especially the working and middle-class which utilize government services such as education, health care, and infrastructure.  

Also, wealth and income inequality are a cause of economic crises, and reducing these inequalities is one way to prevent or minimize profound economic slumps.  In a market economy, redistribution allows the transfer of funds from the investor class who are more likely to save or speculate to the consumer class who are more likely to spend the additional money thus re-circulating it back into the economy.  The increase in aggregate demand by redistributing wealth from the top to everyone else spurs economic growth that benefits everyone.  The most prosperous economies in the world today contain stronger balances of redistributive economic policies, as evidenced in the Gini Index of OECD nations.   There is a direct correlation between lower Gini coefficients and higher economic growth.

So when you hear someone ranting off the line about half the country not paying any income taxes or how progressive taxation is “socialist”, we should be quick to point out that progressive taxation is the glue that holds capitalism and democracy together.   Without wealth redistribution, we would never be able to preserve our democratic society but rather we would ultimately become a plutocracy of ruling elites. 

After all it was Adam Smith who wrote in “A Wealth of Nations”:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

If people don’t already have enough contentious issue with the U.S. Supreme Court’s decision in the Citizens United case, then they definitely should by the time this election is over.   There really is no telling how much money Netanyahu’s Likud party is pouring into pro-Romney Super PACs, not to mention Netanyahu’s antagonistic propaganda war against Obama.   As we have seen since Netanyahu took office in late 2005, he is not a very respected leader around the world, most western Prime Ministers and Presidents have a purposeful yet uncordial relationship with him because of his military hawkishness and saber-rattling.   Not to mention, Netanyahu’s Likud party in Israel is an extreme right-wing party.  

We’ll never get close to realizing a long-term Israeli-Palestinian solution if Republicans in the U.S. continue over-pandering to the Israelis for political gain.   We are an ally to Israel and Palestine and we need to remain impartial, which is what Obama has done.

 Nuclear weapons are a deterrent to war, and the Iranians are developing a nuclear weapon for this reason out of protection.   Deterrence theory gained increased prominence as a military strategy during the Cold War with regard to the use of nuclear weapons.   As Bernard Brodie claims in “The Anatomy of Deterrence”, “It took on a unique connotation during this time as an inferior nuclear force, by virtue of its extreme destructive power, could deter a more powerful adversary — provided that this force could be protected against destruction by a surprise attack.”

We have had U.S. troops surrounding Iran for a decade now and we have Neocons in the Republican party who are constantly saber-rattling about attacking Iran, not to mention Netanyahu’s war mongering.   Pentagon experts believe that Iran is a rational actor – they are a developed nation with economic ambitions, they are not suicidal jihadists.   Iran’s activity and nuclear ambitions are not an act of provocation, rather they are a deterrent to war. 

The best policy is to continue with strong economic sanctions, but a military war with Iran is definitely not the answer and would not be worth the tremendous cost.   We have already provided stockpiles of missiles to Israel and have helped them develop a missile defense system, if Netanyahu wants to go further than that then the U.S. should tell him that they are on their own.   Unless Iran unilaterally attacks Israel, we should stay out of it.

Furthermore, voters in the U.S. should take special note to, not only Romney’s foreign policy missteps, but also how a leader performs in times of crisis.  Romney’s shoot first and aim later response to the U.S. embassy attacks amounted to a very consequential miscalculation on his part.  If Romney’s campaign is any indication of how he would govern and which policies he would pursue, then remaining undecided voters in this election should heed this warning.

Following this weekend’s Meet The Press interview, despite David Gregory’s repeated questions and pleas for more details and policy specifics, Romney continues to dodge and evade.  Why is a presidential candidate who has been running for this office for the better part of five years so unwilling to indulge and so unprepared?  As we move further into this campaign season, it becomes so obviously clear that Romney’s absent centrist general election pivot will never materialize due to the positions of his base.   Romney simply won’t reveal tax reform details because they won’t be popular with the tax increase resisters within the Tea party.

Where does Romney really stand?  If elected, Romney would probably implement, at least some of the Bowles-Simpson plan.   What Romney has previously hinted at does not differ much at all from the framework of Bowles-Simpson’s tax proposal, but his base is marginalizing which policies he can pursue and what he can say on the election trail.   His conservative base would ditch him if he proposed that now, that’s why Romney has been so short on details.   One other area that Romney has mentioned in the past, is eliminating the employer-sponsored health insurance tax credit.   That alone, could close a lot of the revenue shortfall from implementing the lower tax rates.  Also if done right, the corporate tax code is where you would find the largest amount of tax expenditures to eliminate in order to maintain revenue neutrality with lower rates while spurring economic growth.

There is a wide consensus among economists and policy experts that tax reform will be a major national agenda issue before the year-end fiscal cliff, regardless of who is elected this fall.   Congressional Democrats should use ending the Bush tax cuts for incomes over $250K per year as negotiating leverage, but they should not destroy a debt reduction deal solely due to an “all or nothing” approach if it came down to that.   After all, the Affordable Care Act and Alternative Minimum Tax are negating much of the upper income Bush tax cuts anyway.   Democrats could get Republicans to agree on maintaining the AMT at current levels rather than raising tax rates.   The payroll tax cuts should be set to expire once the national unemployment rate drops to at least 7%, the payroll tax cuts have indeed provided Keynesian stimulus that has helped spur aggregate demand and therefore should be a part of the equation until consumer demand returns to pre-recession levels.

Bottom line, we need our elected leaders in Washington to make the tough decisions to get this done.  There is no more room in the political discourse for politicians to criticize compromise or stick to their ideological guns when there is such a big need for common sense, pragmatic solutions.   At this point, Obama seems to be winning the tax reform debate by default, or at least until, Romney is ready to talk.

The DNC speech by Stacey Lihn, telling her story about her young daughter who was born with a congenital heart defect, was absolutely moving.  This was the most powerful message in support of the Affordable Care Act that I have ever seen or read.  Stacey Lihn said, “Governor Romney says people like me were the most excited about President Obama the day we voted for him.  But that’s not true.  Not even close.  For me, there was the day the Affordable Care Act passed and I no longer had to worry about Zoe getting the care she needed.  There was the day the letter arrived from the insurance company, saying that our daughter’s lifetime cap had been lifted.”  Lihn wasn’t shy about the stakes for her family. “Governor Romney repealing health care reform is something we worry about literally every day,” she said. “Zoe’s third open-heart surgery will happen either next year or the year after. If Mitt Romney becomes president and Obamacare is repealed, there’s a good chance she’ll hit her lifetime cap.”

The Lihn’s story is what politics and public policy are all about to me. Sometimes we get caught up in the political gamesmanship and the latest polling, but when you begin to understand how public policies can affect ordinary Americans it makes it all the more worthwhile.  This is what politics should be all about – not the back slapping, not the fundraising, not the negative advertising, and not the polling.  It’s about public service and using influence and power to improve the lives of our country and our people.  I applaud Democrats for featuring the Lihn’s story in their convention program and for making compassion a part of their party platform.  Maybe our country wouldn’t be so polarized if we included more of these stories in our normal political discourse.