Archive for February, 2012

Socially Dysfunctional

Wednesday, February 29th, 2012

Well it appears that the Republican nomination process, which had so much interest and promise at the start has devolved to the same old name calling divisive tactics we’ve grown to expect from the current crop of conservatives.

Romney is outspending his rivals at the rate the three or more to one, and still can’t seem to close the deal.  That’s because he continues to remind the working class voters he is wooing that he is a rich country club guy.  He offers Perry a gentleman’s bet for $10,000 in an attempt to call Perry’s bluff.  He claims not to be worried about the poor.  He defends the personhood of corporations.  He says he likes firing people.  He disingenuously pretends to sympathize with those who have been laid off while defending policies at his own company which laid off thousands.  He claims to understand the needs of Michigan while at the same time defending his op ed which called for the government to let domestic auto manufacturers go bankrupt.  He demonstrates his support of GM by declaring that his wife drives “several Cadillacs”.  He tries to reach out to the NASCAR crowd by showing up at an event and then admitting that his only connection to the sport is that some of the wealthy folks who own some of the cars are friends of his.  He even manages to upset dog owners by defending his mistreatment of the family pooch.  Finally he defends his wealth saying that if someone has a problem voting for a successful (read wealthy) person, they should vote for somebody else.

Socially conservative Republicans have taken his advice to heart and ARE voting for somebody else.

The problem is that the “somebody else”, at least in the form of Rick Santorum, is even crazier than Mitt.

Santorum has done the impossible (contending for the Republican nomination) by giving voice to the unspeakable (the deep biases of social conservatives).  He took advantage of a bad Gingrich debate performance in Florida to leapfrog Newt in the “anybody but Mitt race”.  Gingrich was counting on Florida being the knockout blow for Santorum which would allow Newt to become the sole standard bearer for the conservative vote.  Instead, Santorum is filling that role because he has been willing to take public positions that are even more radical than Newt.  Now that’s saying something.

Santorum is proposing nothing less than a religious take-over of government.  This has allowed him grab the radical right standard from Newt and take Mitt on in the celebrity death match that social conservatives have been waiting for.

The Republican establishment can’t believe their eyes.  This is their Frankenstein nightmare.  The Tea Party that they used to gain a House majority in 2010 has turned on them with the full force of self-righteous fury.

“It makes the party look like it isn’t a modern party,” Rudy Giuliani told CNN’s Erin Burnett, fretting about the candidates’ Cotton Mather attitude about women and gays. “It doesn’t understand the modern world that we live in.”

After a speech in Dallas on Thursday, Jeb Bush also recoiled: “I used to be a conservative, and I watch these debates and I’m wondering, I don’t think I’ve changed, but it’s a little troubling sometimes when people are appealing to people’s fears and emotion rather than trying to get them to look over the horizon for a broader perspective.”

Alan Simpson, the former Republican senator from Wyoming, recently called Santorum “rigid and homophobic.”

Arlen Specter, who quit the Republicans to become a Democrat three years ago before Pennsylvania voters sent him home from the Senate, told MSNBC: “Where you have Senator Santorum’s views, so far to the right, with his attitude on women in the workplace and gays and the bestiality comments and birth control, I do not think it is realistic for Rick Santorum to represent America.” That from the man who accused Anita Hill of perjury.

The fact that Romney eked out a slim victory in Michigan over Santorum really doesn’t matter.

What matters is that the social conservative Tea Party wing of the Republican Party continues to reject Romney.  If you add up the votes for Santorum, Gingrich, and Paul – Romney lost Michigan.

The Republican social conservatives may not have enough votes to win the nomination for Santorum, but they do have enough influence to force Romney into a very difficult choice.  If he hopes to unify the party, he is going to have to move so far right that he becomes unelectable in November.  Some are saying that this has already happened.

If he abandons the conservative wing of the party, they may run their own candidate (Sarah Palin) or become so disgusted with the nominating process that they stay home in November.   It also doesn’t help Mitt that his backers in the Republican establishment continue to whine that they don’t have a more likeable guy like Jeb Bush or Mitch Daniels to turn to.

At least in Michigan, Santorum effectively poisoned the water for Romney in the fall already with a simple question which Romney never answered.  Why did Romney support the Wall Street bailout while opposing the auto bailout?  This wasn’t lost on Obama either, who gave a barn burner speech to the UAW in Washington on the same day that Michigan voted and asked the same question.  If Romney does eventually win the nomination, you can bet that this question is going to continue to be asked all the way until the vote in November.  That’s because it cuts right to the heart of why people just don’t trust Romney.

In the meantime, this primary continues to grind at the fabric of this country.  The claims against the President become more and more extreme.  Gingrich who managed to skip Vietnam calls Obama “the most dangerous President in modern American history” because he is “incapable of defending the United States.”  Perhaps Newt missed the headlines about bin Laden, al-Awlaki, or the scores of other al Qaeda leaders that have been killed or captured.  That sort of language may work with the Republican base, but it is going to alienate mainstream voters who still possess a sense of fairness.

Obama may end up with an easier victory this fall than he anticipated, but he will have to deal with an even more deeply divided country than when he first took office.

Make a Wish

Sunday, February 26th, 2012

Senator McConnell has been telling anyone who is willing to listen lately that during the first two years of the Obama administration, Congress gave Obama and the Democrats everything they wanted.  This is part of the larger narrative that Obama should own the current economic condition because his policies have not resulted in unemployment rates less than 8%, deficit reductions, or a robust economic recovery.

“In fact, he’s been in office for three years. He got everything he wanted from a completely compliant Congress for two of those three years… We are living in the Obama economy.”

The reality, however, doesn’t match this narrative very well.

The plan to bring down Obama was hatched in the first months after his inauguration.  That plan was to unanimously oppose the Obama administration at every turn in order to, according to McConnell,  “Keep our fingerprints off of these proposals,”

In October 0f 2010 McConnell said, “The single most important thing we want to achieve is for President Obama to be a one-term president.”

Here were the results of that opposition.

Obama was unable to allow the Bush tax cuts to expire for those making more than $250,000 a year because he didn’t have the 60 votes needed to overcome a Senate filibuster.  Cost $544B.

The DREAM act also failed in the Senate, though there were 55 votes in support.

The Senate threatened a government shutdown over key appropriation and debt ceiling bills.

The stimulus package was almost $100B less than originally proposed because of Republican opposition and still had no Republican votes in the house and only three moderate Republicans in the Senate.

The Healthcare reform package received no Republican votes even after it was stripped of the public option that was an important part of the original proposal.

The recent budget proposed by Obama is no different.

The administration claims that the budget includes $2.5 of spending cuts for every $1 in tax increases.

The Republicans criticize the budget because they claim it includes $1.9 trillion worth of new tax revenue and $1.5 trillion worth of more spending.

The truth is that they are both playing games with the numbers in order to make political points in an election year.

The administration’s numbers include the budget reductions already agreed to in the debt ceiling deal, money from winding down the wars in Iraq and Afghanistan, and reduced debt service.  But at least their math is good – $3.8T in reductions compared with $1.5T on tax increases (primarily for letting the Bush tax cuts expire for high income people) does result in $1 of tax increases for every $2.5 in “spending” cuts.

The Republican numbers are based on calculations that came out of the House Budget Committee rather than the CBO.  They ignore the war savings and the debt deal cuts.  They add back in the Medicare “doc” fix even though they were the ones who voted to pass it without any offsetting revenue to cover the cost.  All told, this pretty much wipes out the reductions in the Obama budget.  For good measure the Republican’s also increased the Obama budget’s tax increases by $400B because they don’t agree with the administration’s definition of what constitutes a tax versus for example, an increase in pension fund contributions that is scheduled to take effect for federal employees.

What is really interesting about this whole exercise is how the Obama budget – as disputed as it is – compares with the budgets proposed by the Republican Presidential candidates.  Even though it doesn’t reduce the deficit as percentage of GDP over the next ten years, it does do better than anything the Republicans have proposed.

This is based on data from the nonpartisan Committee for a Responsible Federal Budget.

Where all of the Republican candidates get into trouble, not surprisingly, is in revenue.

Alice Rivlin founding director of the Congressional Budget Office and a senior fellow of economic studies at the Brookings Institution said, “I don’t expect Republicans to propose raising taxes, but it seems to me that one definition of responsibility is ‘Can you reform the tax system … in whatever [way] you think is best that at least doesn’t make the situation worse?’ And on that score, all of these candidates fail.”

The current debt is 70% of GDP.  The “realistic” projection with Obama’s current budget is that the debt will increase to 85% of GDP by 2021.

Because the candidates haven’t produced many specifics, the report includes a range of results for the budget proposals of each candidate based on some assumptions.

As compared to the current realistic projection, Ron Paul is the only candidate whose budget proposals improve on the 85% of GDP by 2021 target set by the Obama administration.  Everyone else is worse.  What is of concern, however, is the risk in all these proposals.  When you consider the worst case assumptions, they are all very bad.

In the best case, Ron Paul would reduce the debt to 67% of GDP by eliminating 5 federal departments and canceling all Federal Reserve debt.  In the worst case, debt would increase it to 93% of GDP.

In the best case, Romney would reduce debt in 2021 to 75% of GDP.  In the worst case it would increase to 94% of GDP.  Those assumptions were before Romney’s most recent tax proposal which, without further offsets in spending, would add $2.6T to the debt, wiping out the reductions in his best case scenario.

Santorum was even worse, reducing debt to 74% of GDP in the best case, but exploding it to 107% in the worst case.

Gingrich’s plans were the worst.  There is no reduction of debt even in the most optimistic projection with the worst case projections leaving the debt at 126% of GDP in 2021.

Specifically in the area of healthcare the nonpartisan group projects that repealing the Healthcare Reform bill will add $80B to the debt by 2021 and the alternative Republican proposals could add as much as $330B to the debt.

The bottom line is that budgets remain political documents.  The likelihood of any of them including the Obama proposals being enacted in anything close to the form that they were proposed is between slim and none.  These are documents that reflect political priorities rather than real spending.

They real spending policies end up being hashed out in Congress.

Given the current make-up of the Congress, that is going to continue to be a challenging task.

Ultimately the American voter is going to have to choose in November whether they want to continue to support the “no tax” policies introduced by the Republicans that they elected in 2010, or punish them for their uncompromising tactics and refocus government on creating jobs.

Party Time

Tuesday, February 14th, 2012

The Good News

In the words of Tom Friedman, “America is hard-wired to thrive” in this new world that is unfolding.

We are talking about a flat world where labor is going to flow, not just to the lowest cost markets, but to the most productive markets.  This is a hyper connected world where companies have the information they need to determine which investments give them the best chance to maximize their return on investment.  As an example, North America may become the cheapest place to manufacture energy intensive products (e.g. steel and aluminum) because of new domestic oil and gas discoveries.  Lower costs for raw materials combined with high tech manufacturing will allow our automation-enhanced high wage workers to out compete low wage low skill alternatives.

This is a world that will reward education, innovation, and those economies that can best develop and attract talent.  We are leaving the world where there are substantive differences between developed economies and developing economies.  We are entering a world where the differences will be drawn between those economies who celebrate imagination and those that stifle it.

Here’s what we have to do to dominate this emerging “creativity” economy.

The Cost

We have in invest in better infrastructure, post secondary education for everyone, a welcome mat for talented immigrants, regulations that encourage risk-taking while preventing recklessness, and government funded R&D to create new opportunities for the VC community.  Success depends on a strong public-private partnership where government understands its role, to make the world safe and fair for our businesses, and business understands its role, to compete aggressively, play by the rules, and grow the US economy.

We also have to address the two long-term challenges that could undermine our ability to grow this new economy – debt and entitlement obligations.  There is no silver bullet here.  The math is undeniable.  These two problems cannot be solved without raising more revenue (likely through taxes), trimming entitlements, and reducing expenditures (primarily defense).  We have to do all three.  Anyone who tells you that we can accomplish this by doing less is using “magical” thinking.  Magic may be entertaining, but it is only an illusion.

Finally, we have to embrace the changing energy landscape.  Regardless of the new discoveries of oil and gas in North America, we will not be able to “drill” our way to a new economy.  The most we can expect from those discoveries is more time to make the transitions away from fossil fuel that we all know must be made.  The next great global industry is going to be efficient use of our existing resources and development of new clean energy alternatives to fossil fuels.  The winners in this new economy are going to also be leaders in this new global industry.

The Bad News

We have a broken political system.

When Republicans say that they won’t accept $1 of increased revenue in return for $10 of spending cuts, they have cut themselves off from reality.  It simply is not possible to make the sorts of investments that we need to make and bring down the deficit and restructure entitlements with spending cuts alone.

Similarly, when the Democrats suggest that the only thing we need to do is raise taxes on the rich, they are also not telling the truth.  Entitlements also have to be restructured and spending cut.

The difference, however, is that Democrats don’t seem to have nearly the same hardened ideological positions as Republicans.  In all of the confrontations that have happened since the Republicans gained control of the house and veto power in the Senate, virtually every confrontation has resulted in Democratic concessions to craft a compromise.

Third Choice

Right now the only thing that both parties are offering the American people is more of the same.  They are in effect asking the voter to make a binary choice.  Either voters elect enough Democrats to overcome Republican opposition to the Democratic agenda.  Or voters elect enough Republicans to overcome Democratic opposition to the Republican agenda.

Both parties are guilty of “magical thinking” – suggesting that their flawed and partisan agendas are capable of addressing the needs of the country.  In fact it is compromise that extracts a rational set of legislation from ideological positions that are not practical.

The way that it should work, or at least the way that it has worked in the past is that both parties bring their agendas to the table and negotiate legislation which has some Democratic items, some Republican items, and some items that are in the middle.

The Democrats still seem willing to engage in those discussions.

The Republicans, however, have rejected compromise as an option because they claim it means compromising their ideals.  They have instead adopted a scorched earth strategy where they deliberately undermine the very institutions of government they took an oath to support.

If compromise is no longer part of the toolbox of the current set of Republicans, then we need a new set of Republicans.

We need are Republicans who are willing to fight for their ideas during the election cycles, but will also accept the results of an election.  If they win, they will work with the Democratic minority to govern effectively.  If they lose, they will engage in strategic compromises to advance the interests of country, rather than simply grind the government to a stop until the next election.

We need a Republican party that is going to offer a conservative rather than ideological vision of this new world.  We need a Republican party that is willing to engage the Democrats in an informed debate on the best fiscal, energy, immigration, and public-private partnership policies.  We need the sort of public dialog that educates voters on what the real issues and choices are.  Then we need a Congress willing and able to craft legislation based on election results.


Since it is unlikely that Republicans will voluntarily abandon their current ideological crusade, there really is only one other alternative.

They have to lose and lose badly. They have to lose so badly that those who have been driving this hard turn to the right, are banished.  They have to be crushed so badly that they are forced to engage in a fundamental reassessment of their strategy and values.  They have to be banished to the wilderness by voters and told not to come back until they have something better to offer voters.  They have to be beaten back to their senses and forced to re-engage with the Democrats rather than simply demonize them.  This loss has to represent a wholesale rejection of ideology and a demand by the voters for a return of the practical, thoughtful, conservative Republicans who brought us the interstate highways system, the EPA, and the Helsinki Accord.  Those Republicans can help create a new political structure where creativity rather than confrontation, ideas rather than ideology, compromise with an eye on the prize, lead us to the promised land of this new global creative economy.

Virgin Birth

Thursday, February 9th, 2012

There has been a controversy recently regarding new rules coming out of the Health and Human Services office.  Those rules require employers to provide contraceptive services with no co-pay as part of the basic services covered by the insurance policies that they offer their employees.

This decision was the result of recommendations of the Institute of Medicine.  This is an independent group of physicians and researchers that concluded FDA approved birth control is a medical necessity “to ensure women’s health and well being”.  Their recommendations are based on the facts that half of the pregnancies in this country are unplanned and 40% of unplanned pregnancies end in abortion.  They project that making birth control more accessible for working women of child-bearing years would reduce unplanned pregnancies and abortions.  Their studies added that women with unintended pregnancies are more likely to suffer from depression, smoke, drink, and less likely to seek prenatal care.  Those behaviors potentially harm fetuses and put babies at increased risk of being born prematurely with a low birth weight.

HHS has a four-part test to determine exemptions for churches and synagogues, primary schools, and some religious secondary schools.   Institutions like hospitals and secular colleges (like Notre Dame) that are affiliated with religious institutions but have a diverse set of employees/students that are not dominated by just one religion are not exempt.  It should also be noted that many of these “religiously affiliated” institutions receive significant amounts of federal funding and are accustomed to the regulations that go along with that funding.

The Catholic Church objected strongly claiming that this rule infringes on their constitutional rights to freely exercise their religion.

Because we are in an election cycle, this created a firestorm of criticism directed at the Obama administration coming from the flock of Republican presidential candidates.  Several have accused the Obama administration of waging a war on religion.

The final bit of data is that surveys have consistently reported that 98% of sexually active women of child-bearing years in this country who identify as Catholics do use contraceptives.  A new survey released by the Public Religion Research Institute says that 58% of all Catholics agree employers should be required to provide their employees with health care plans that cover contraception.

But let’s get back to the interesting questions that this issue raises.

The first is the constitutional right to freely practice religion.  The first amendment prohibits congress from passing a law respecting an establishment of religion or impeding the free exercise of religion.

The Supreme Court has determined that these rights are NOT unlimited.  Some examples of practices that are not allowed include polygamy and the use of illegal drugs in religious services.  At the same time the court has also held that an employee who was fired because she refused to work on Saturdays because of her religious beliefs, still qualified for unemployment benefits (which are funded in part by her previous employer).  So employees are not required to surrender their religious beliefs when those come into conflict with expectations of their employer.

In this case, you have the interests of the Catholic Church versus the interests of employees who are not Catholics.  The Catholic Church as an employer is required to follow many of the same rules as any other employer.  It can’t discriminate based on race, age, or gender.  That doesn’t mean that it has to hire women priests, but it does mean that it can’t discriminate against women in non-religious roles.  There are similar rules regarding the sort of insurance coverage that every large employer is required to offer.  These rules are part of the larger effort to bring down the costs by making sure that every American has access to affordable healthcare.

The basic question here is does the Catholic Church have the right to impose Catholic beliefs regarding contraception on employees who may not share that religion or those beliefs.  The imposition is that the Catholic Church is asking that it be exempt from covering expenses in their employee insurance plans that they feel violate some part of their beliefs even though other non-religious employers are not exempt.

The second question is much more practical.

The Catholic Church is advocating that all of their enterprises be exempt from requirement based on a religious belief that isn’t being practiced by 98% of female Catholics in this country.

An analogy could be the speed limit laws.  Highway speed limits are rarely enforced.  Enforcement begins somewhere above 5-10 mph over the speed limit.  That’s because of a number of factors, but the net result is that very few motorists drive at posted speeds on the highway and virtually all levels of government and law enforcement are fine with it.

In the same vein, a more practical response by the Catholic Church would be an opt in system where they would only be required to offer birth control to female employees who either self identified as non-Catholic or explicitly requested the service.

The final question is also much more practical.

The Catholic Church is also an ardent opponent of abortion.  One of the primary goals of reducing the co-pays for contraceptives is to reduce unwanted pregnancies and the high rate of abortions associated with them.  The data strongly supports the claim that even small co-pays reduce contraceptive use.   That leaves one part of Catholic Church in the position of advocating a policy which supports the current level of abortions.  Another part of the Church spends millions to reduce abortions and attack the current laws which allow them.

The bottom line is that HHS understood that this would be a challenge for Catholic institutions and provided them a year to work out an implementation plan with the government.  The White House has also signaled that they are willing to seek common ground where Catholic beliefs are respected but women are also receiving the care they need.  Whether or not they are going to be able to get a deal done is uncertain.

This will likely end up being decided in the courts and in the meantime will be just one more divisive issue that will be passionately argued and widely misunderstood.