Democrats are the New Republicans

Imagine, if you are under the age of 40, that once, not really so long ago, one of the two major American political parties espoused the following ideals, and the other party did not believe in these ideals strongly at all.

• Free Enterprise -- That companies should operate in a market under the law without subsidies from government....  Without, for instance, subsidies for oil exploration.  ("According to...the Congressional Budget Office, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry." -- NYT)
• Market Solution for Health Care -- Health Care should be extended via a market solution: a regulated marketplace of private insurers and providers, a mandate, and subsidies for the poorest families (Nixon).
• Naive Free Trade -- Extend free trade everywhere possible, regardless of factors like currency manipulation.

So, which party was that?

The Republican Party.

Today, one party pays lip service to these ideals at times, but the other party truly believes in these ideals.

More of the true believers are Democrats.

I'd go further.

Today, it is the Democratic Party that believes in the Horatio Alger story, the upward mobility, the land of opportunity.

These are strong ideals, and the Democrats, having the real belief, should embrace the first two of these ideals, and Horatio Alger, more forcefully, publicly, rhetorically.

Free Trade, on the other hand has a complexity that is crucial:  Free Trade isn't actual unless the currencies freely float (click link to understand why).

...

I was surprised as I began to finish this post and looked up when Elizabeth Warren was a Republican because her party affinity history, wiki nutshell version, is just like my own:

"Warren voted as a Republican for many years saying, "I was a Republican because I thought that those were the people who best supported markets." She states that in 1995 she began to vote Democratic because she no longer believed that to be true, but she says that she has voted for both parties because she believed that neither party should dominate."

People, Elizabeth Warren has evolved some, but not that much.  It's the Republican party that has changed so drastically.

The Realpolitik Error, Our Modern Bane

James Fallows, whom I've read since I was something like 16 yrs. old it seems (and that is a long time ago), follows an immigrant reader into an interesting mistake  in yet another of too many bits in The Atlantic.  (Does anyone still read David Brooks for interest alone?  Even the best, hardest working columnist-for-life just wears on us when they don't go to the well deeply enough.)

Fallow's reader writes:

He [Putin in his NyTimes Op Ed] is making his case, a case that the world will not understand as Americans understand it. He has protected his interest in Syria under the banner of advancing an international interest. He has established, further, a precedent. That the United States does answer to the council, that it cannot act unilaterally and that our nation can be made to suffer a geopolitical consequence. If you were a country in the Middle East, whose protection would you want right now?

I brought up Khrushchev not incidentally. I currently view our recent impasse as very similar to the Vienna Summit. Americans are quick to hand-wave the foreign apparat, but slow to realize what just happened. We got duped into having a fight we didn't want to have. We wanted limits on Assad's power, and we now have significant limits of our own by way of this precedent.


This is all fine and clever and quite wrong.  Fallows follows by implication this classic realpolitik error, so commonplace in modern times.

The idea that America must be free to act preemptively, without much constraint, and that such actions, like drone strikes, make us safer.

In reality, such actions degrade our security in a clear and definite way.

When we kill people who haven't directly attacked nor are directly attacking us or our contracted allies, everyone senses that we are in the wrong.

Putin, as a Russian controller, manipulator, whatever, is quite beside this point.

By becoming an Evil Empire, we are ensuring not only our eventual fall, but fallout, the very best case of which is losing our freedoms to a security/police state.  The worse and more likely fallout is suffering retribution that kills not a few dozen or a few hundred, but 2 or 3, even 4  magnitudes higher in body count.  Eventually.

In short, the common delusion that we can make ourselves safer by killing punitively or preemptively.

That someone wiser said "He that lives by the sword shall die by the sword" should not only give us pause or make us add in another layer of checks and balances -- it should lead to deeper introspection, or something.  Anything.  Anything but this realpolitik.

In reality, billions of people know when a state is in the wrong, and like water building behind an obstruction, the opposition to the wrong grows.  Everything seems fine to the self-fooling until the sudden and inevitable result.

This will come, unless we recant.

And yes, a religious term is the most appropriate.

Because such a belief in killing as the first or 2nd solution, endlessly supported in our media, our movies, books, language -- it is a mythos, or a religion.  But not a good one.

This does seem a mythos.  So we do have a battle of religions more or less.

Since this battle is in our hearts and minds, we could change in a day, and that change unfurl over a few years, like Gorbachev's Glasnost.  A harmful Wall would fall.

And that could save a lot of American lives.  After all, it is never too late for us to change.

We can renounce unprovoked attacks and killing, we can apologize, we can reform, and we can begin to listen more to the better angels of our nature, and less to the impartially, putatively objective realpolitik of the law-of-the-jungle crowd.

Not sure the law of the jungle isn't best?

Consider: Which nation is safer right now, in the big sense -- the U.S. or China?

Like the U.S., China has an initial level of safety (if it acts neutrally) that arises from its sheer size and weight.  To the extent, extensive, that China has not taken on so many fights of the world, China is by far the safer.

The time to fight a Nazi Germany or an Al Qaeda, as always, as in all of time, is as it begins to attack.

We do always need to wisely prepare, we need to watch and be ready.

We should never preempt.

Thoughts on the Election

One has to wonder whether any smart person really wants to be president during 2013-2016.

I think that both men have had second thoughts, and at times shown real ambivalence about winning, which comes out as surprising political mistakes that could throw the election.

We shouldn't be surprised.

After all, when overall global savings looks set to exceed demand and investment -- global private savings remaining high while global governmental spending decreases -- we can expect tough times and then recriminations in 2016.

Regardless of current rhetoric and mythological language.

One might say something like "Government doesn't create jobs,"  but one actually knows, down inside, that what creates jobs is for money that is earned to be spent or invested in investments that result in increased spending.  Investments not in assets bubbles like stockpiling gold or London houses, but more traditional, normal investment -- money for new roads, buildings, science, machines, education, home renovation, capital investment in technology, all the productive things the word "investment" has meant in healthy economies for centuries.

If so much money continues to be saved (think China, Germany consuming a fraction of what they produce) so that savings considerably exceed spending and productive investment, then you have a problem.

Unless the abundant savings is all borrowed and used to build roads, educate students, improve technology, etc., then the economic circular flow of money that supports all of our jobs and income gets attenuated, constantly, until something radically increases spending (as did World War II and it's preliminary buildup)....

Regardless of rhetoric, both of these men are smart enough on some level, even intuitively, to know this, and be aware of the real situation, the real way the economy works.

So why would anyone really want to be President in 2013, when China and Germany will continue to fail to use as much as they produce, exporting unemployment around the world, while the US looks likely to reduce it's deficit spending, and thus use less of the excess global savings?

I think lately both men have come to terms with this situation, and set their own internal goals.

For Obama, I think his goal is to see through his initiatives -- green energy, education support, continued federal dollars for science, even health care reform -- things that provide a stronger future for the nation.

Even health care security helps the economy -- when workers feel more secure about their health care, they are more willing to buy a new car or tip the waiter more at a restaurant.

Essentially, when there is abundant unused savings, the strongest national economies can borrow at rates that hit record lows, because the markets are looking for any safe yield, even at 1.5% or less.

How fundamentally strong is the U.S. economy?   Many billions of free floating dollars choose U.S. Treasuries as their home.  Why?  In part because economic strength depends on market demand -- consumer demand -- and the U.S. has the most of that in the world.  Ergo, this is the most fundamentally strong and sound economy in the world.

But that doesn't mean a titanic mortgage credit bubble and collapse is easy to ride out.  It's no ordinary storm.  This ship could be steered sideways to the waves and find itself truly foundering, instead of only riding rough seas as now.

So why does Romney want to be President?

For Romney, we are forced to speculate.


Is it Power?  A vision of personal greatness and prestige?

Does he have actual beliefs, in spite of changing positions?  Actual beliefs that are passionate, in spite of the smoothness and clear acting?

He's a tremendous Story Teller, one of the best around.

While the U.S. has done far better than any other nation that suffered a major housing bubble and collapse in the last few years -- better in employment, better in the general economy, and best in the world in reducing total debt of the combined public and private debt load (private debt in the U.S. has declined far more than public debt has increased)....

Romney has made it seem, through masterful story telling, that this very good result is a real failure.

Imagine a student who does the best in a class of 20 on an extremely difficult test, scoring only 70%, and then a bystander labels that result not as a success, but as a failure, and works to convince many other people that the success is a failure.

But what is Romney really after?  What does he really want, himself, personally?

Perhaps he wants to be the Boss.  It's a theory.   To project power around the world.

Instead of walk softly and carry a big stick, it appears from his own words at times that Romney would like to walk aggressively and be quick to whack some heads when an opportunity shows up.

Is that just bluster meant to nab a few votes, or is it a real attitude?

From his description of Obama projecting weakness -- as if all the fighting and resolve we have shown becomes weakness if we are diplomatic in language abroad -- it seems Romney imagines that acting hard nosed and seeming uncompromising to some other peoples is good for security.

It is good for losing some friends and alienating some good will and losing some soft power influence, the kind that actually matters over time.

The wise know that it is better, safer even, to be loved than to be feared.

But, unlike Obama, Romney can imagine that the ease with which he exercised power at Bain Capital is a way to lead a nation and an economy.  He can imagine this because he hasn't faced the detailed information and reality that Obama has.  He hasn't been disillusioned of his delusions, yet.

Hopefully, he won't have to chance to be disillusioned in that way.

Calling the Better Angels of Our Nation

Do we want to be a people, one people?

This is the fundamental question that most often divides our representatives -- how are we to be together.

Loosely?  If all people have some evil in their hearts, then loosely would seem best.

But if we are born innocent, and any evil we have is only learned, then we might be redeemed by a helping hand.   One might reach out to grab and rescue a hand from the rough waters of the sea.

Will we choose to be more than only allies?

Might we be a People?  The American People.

"Together," Obama says, and this needs to become the heart of his message this fall. Because "A house divided against itself cannot stand."

Tocqueville on Cantor and Occupy Wall Street

"Despotism, which is fearful by nature, looks upon the isolation of men as the surest guarantee of its own duration and ordinarily does all it can to insure that isolation.... ...a despot will be quick to forgive the people he governs for not loving him, provided they do not love one another....  Minds that aspire to combine their efforts to promote the common prosperity he [a despot] calls disruptive and restless, and, altering the natural meaning of words, he calls those who keep strictly to themselves "good citizens." -- Democracy in America, Alexis De Tocqueville (Translation by Arthur Goldhammer), Volume 2, Part II, Chapter 4

House of Representatives Majority Leader Eric Cantor said: "I for one am increasingly concerned about the growing mobs occupying Wall Street and the other cities across the country."

Let's *not* be Cantor's version of good citizens, please.

Good citizens help form their country.  They show up and participate.

________________

There's a nice instance of showing up in the previous post (also from today) just below:

America!

Inspiring sight this weekend.  We were going to a festival and traveled along a commercial boulevard in a big suburb, on a nice sunny and windy day, when a truly novel sight met my eyes in that landscape.

To get this scene, imagine an archetypal suburb shopping road, all chain stores, restaurants, gas stations,  totally consumers jockeying along wishing there were less people doing the same thing at the same time, packed, slow roads (judging from this road, there isn't much recession going on).

Suddenly alongside the road at a major intersection I saw a large, sparkling, 4' x 6' American flag whipping straight in the wind, like a vision.  So new, so clean, so red and blue and white.  At first, such a sight made me expect some same-old-same-old protest.

3 people stood there, and as we passed slowly from the intersection in heavy traffic I saw the man holding the flag pole smiling like it was a new world.

His sign read:

War is stupid.

-- Gen. Eisenhower

Cars were honking in support -- this in a suburb of a large city, the classic Republican stronghold.

The 3 protesters waved, smiling at the cars and people, in a clear mutual love fest kind of atmosphere.

Do representatives realize how well most of the American people understand this war is pointless, useless?  I've a feeling anti-war feeling is well above 50%.

There is hope for our nation.

...

"War settles nothing."

~Dwight D. Eisenhower

Yes, He Can, If He Will (Update)

Can Obama speak to Americans, in language that works for a larger portion of the populace?

Yes, he can. He showed us during the address to Congress.

Here's a newer bit I'm listening to now. We want to know if Obama's new way of speaking might stick, as we need it to.... I'll give the address to Congress an A, and this effort (the C-Span video) below a C+.

It's not easy to change. What's needed: more of a sense of emotional urgency. That's a fine line to walk, and Obama has the personality to walk it well, if he can remember what it's all about.



There are two main communication needs for the Country now. One is for a leader to rally us in the right direction.

The second is for someone to widely explain the simple reality that your job depends on the total demand in the economy and whether there is true free trade. We have to get both right. This means we need both public/private investment (such as the proposed Jobs Act would increase), and we need to require (not ask) an end to the Chinese import tariffs against our made-in-America goods and huge export subsidies for their goods sold to us, to give American workers a fair chance in the global economy.

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Update 9/13 PM from the Newshour -- This is more like it:

Watch the full episode. See more PBS NewsHour.

Will Obama Speak to Americans?

Typically, President Obama speaks very well to me, and that's a problem.

I'm definitely more of a reader than average Americans, with a tendency towards nuances and complexity.

As I write, I'm always trying to avoid convolution, because my wife says many paragraphs are unclear in my initial drafts.

And I find Obama's rhetoric, his paragraphs, to be engaging and quite good.

Which means he loses too many people too often before he gets his main points across.

For instance, perhaps he will get across a point at the beginning, and 4 or 7 minutes later, many in the audience are thinking about taking their kids to soccer practice or the dentist, and miss crucial points.

Less is more, for Obama.

I wonder if he knows that?

Popular pundits underestimate Obama's management skill, and overestimate his rhetorical skill. Of course, popular pundits usually misconstrue most things most all the time.

Obama's job is to make it clear even to the obtuse. He won't get the ideological to listen -- they are actually unable, handicapped -- but he could communicate to the rest of us.

Obama needs to be ready to go off his speech, and speak off the cuff.

At such a moment, he needs to begin a sentence not even knowing what he will say, so that more Americans will listen.

He could speak for 3 or 4 minutes, and tell most Americans all they need to hear from him.

What We Really Need Now (Updates: Martin Wolf; Krugman and Rogoff)

(Update 8/23: Krugman and Rogoff at bottom)
(Update 8/2: see Martin Wolf below)

7/29 -- As the popular American dialogue -- which our media blows into a theatrical crisis of the day/week/month -- tends to obscure reality, I thought it would be useful to remember where we really are.

We are on an economic bridge -- a support of deficit spending/investment on education/infrastructure/unemployment benefits -- over a deep economic chasm. Reality is more dramatic than the popular fiction this time.

Here's the normal outcome from a credit/debt/asset bubble-and-collapse such as the one the U.S. has experienced. From the abstract of Kenneth Rogoff and Carmen Reinhart's paper on the normal aftermath of such bubble-and-collapse:

This paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. We find that asset market collapses are deep and prolonged. On a peak-to-trough basis, real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years. Not surprisingly, banking crises are associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls an average of over 9 percent, although the duration of the downturn is considerably shorter than for unemployment. The real value of government debt tends to explode, rising an average of 86 percent in the major post-World War II episodes. The main cause of debt explosions is usually not the widely cited costs of bailing out and recapitalizing the banking system. The collapse in tax revenues in the wake of deep and prolonged economic contractions is a critical factor in explaining the large budget deficits and increases in debt that follow the crisis. Our estimates of the rise in government debt are likely to be conservative, as these do not include increases in government guarantees, which also expand briskly during these episodes.

And this is the average from bubbles both large and medium sized (big enough to put much of a nation's banking system into real trouble/insolvency). And an average that includes especially the last 100 years where governments acted to mitigate the crises, instead of allowing them to slowly grind out (as the US did in the nineteenth century, such as 1870s-1880s long depression).

Since Ronald Reagan's massive deficits ignited a new debt binge, we have experienced an unusually large credit/debt bubble:

From the wiki on the economy of the US:



We are far from getting out of the aftermath: Total public and private debt in the US is still at higher levels vs total US income (GDP) than at the peak of the Great Depression.

And after the asset bubble bursts (housing prices in our case), then households respond to their high debts by cutting spending for many years, even decades if nothing changes. This reduces or eliminates job growth.

That's where we are.

...

In order to recover from this massive debt overhang that would reduce consumer spending and job growth for decades without intervention, household debt vs income ratios must be sharply improved.

When debts become smaller in ratio to incomes, people will feel safe in purchasing more goods and services (much of which will be new style green goods and services -- economic growth and consumption can be environmentally favorable).

In short, for US recovery, people must have less debt and/or more income, including less mortgage debt.

That can only happen by three, make that four, means:

1) Rising incomes
2) Debt restructuring
3) Debt forgiveness

4) Or a lot of time treading water (if very slow growth is even possible -- if economic collapse doesn't ensue!) and such stagnation means a lot of people suffering for a long time

Since rising incomes can only happen via inflation or economic growth (and growth requires more consumer spending), it is obvious, necessary that we need significant help from restructuring and forgiving debts.

Foreclosures and bankruptcies are the two of the most rapid means of forgiving debt.

For this reason, current foreclosures and bankruptcies are especially beneficial to the US economic future.

Instead of a bad sign for our economy, these are a very good sign. They will help the US economy enormously.

(Yes, it is notable how incompetent so much commentary is -- suggesting that what actually helps us the most is a drag on the economy!)

If we had a lot more bankruptcies and foreclosures, quickly, we would get a quicker return to a good economy.

Economic growth also relies heavily on investment, both public and private.

Economic growth happens in response to new products, rising productivity/wages, and rising consumer spending.

Productivity and new products, key to growth, require investment.

Because the private sector is afraid to invest significantly now, deficit spending for public investments -- education (investment in people), infrastructure, technology, and science -- is indispensable to the future economy of the US.

Public investment will kickstart increasing private investment.

Without such public investment, we won't remain among the world's leading economies.

We should therefore focus federal spending, now, on education, infrastructure, science and technology, and require a level playing field in trade with all trading partners (this requires an end to the Chinese export subsidy/import tariff via currency peg).

For a good future, we must have public investment and fair trade. These are the real priorities.

Instead of the current media melodrama about whether the world's strongest economy is a good credit risk (whether US treasuries are a good investment, as the market clearly thinks).... we need to focus on reality and make good decisions now.

It's time for Obama to step up to the microphone in a more dramatic, clear way.

---

8/2: Martin Wolf lays out the big picture succinctly:

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8/23: Paul Krugman and Ken Rogoff on how to get out of this "Great Contraction" (Great Depression) (hat tip to Mark Thoma). Rogoff's idea of mortgage debt relief is one of the most powerful steps we could take to shake off the decades long fallout a credit/debt bubble such as our entails.
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