Tag Archives: economic policy

The Decline of the Republican Party

The Decline of the Republican Party

by

Howard Adelman

Yesterday evening I attended a wedding. There is nothing more inspiring than seeing young people, handsome young men and beautiful young women, marry and set off to turn a cohort into a new generation. However, these days one cannot go out into the public without encountering the effects of the shock waves that have been sent through the body politic, not only in America but around the world. It is as if Italy’s massive new earthquake had encircled the globe. Whether in the hospital attending my wife and listening to the visitors talking with the patient in the next bed, or engaging in conversation last evening with two well-off businessmen – one had traveled all the way from Oregon to attend the wedding – the spectre of Donald Trump filled the air.

Preoccupation with Donald Trump pours out into the conversation unbidden. What does it mean? What does it portend for America and for the world, even if Donald Trump loses after his last spurt to close the gap? It seems that few expect Donald Trump to fade from the scene quietly even if he loses. The only consolation – I am not the only one obsessed.

Donald Trump has often been portrayed as an outlier to the Republican Party, at odds with its essential nature, principles and many, if not most, of its policies. Donald Trump from Queens has painted a self-portrait of the self-made billionaire taking on the billionaire governing class from Wall Street, the ordinary self-made man from the Bronx, Brooklyn or Queens coming forth as a cast off from the ruling hierarchy to lead his dispossessed followers like Moses towards the promised land. In fact, Donald Trump is the logical extension of the way those principles have evolved and have been expressed in most of the recent policies proposed by the GOP as the essence of what used to be its nature has been hollowed out to contribute to a darker, meaner, stressed out and grumpier America.

Begin with immigration, the initial headline issue with which Donald Trump launched his pursuit of the presidency – build a wall, deport all the illegals, Mexicans are rapists, refugees are security threats, the intake of Muslim refugees should be stopped “until we know what we are doing.” No queue jumping. No amnesties. Immigration law has to be enforced to ensure that anyone who wants to come to America waits in line until he or she is adequately vetted and selected. Fear of the invader – Mexicans and Central Americans, terrorists from the Middle East (even though the vast majority have been home-grown radicalized youth) – is married to the sense that neither the legal system nor borders have been up to the task of securing Americans (or Hungarians or Poles or Frenchmen or Brits). Ignore the reality that 25% of America’s core rite of baseball now has 25% of its players with Hispanic backgrounds. Instead, attend to the important shift in the body politic as the proportion of whites in the population is steadily reduced.

But have the Republican Party principles and policies been any different, at least in the basics? The first principle of the Republican Party platform has been that the RP “believes in immigration laws.” The fundamental criterion for any policy is not American economic self-interest but national security, though the immigration program should fundamentally be a skills-based program for selection and a temporary visa program for the unskilled. The RP advocated putting more resources into keeping people out who have not been granted legal admission to the U.S. Otherwise, they contended, the law is a farce. Amnesties only encourage a future wave of new illegals. And large numbers of illegals on American soil (estimated at 11,000,000), they insisted, place unfair demands on the American social security system. All this is stated as a given truth in spite of the data showing that illegals contribute far more to the system than they extract from it. Nevertheless, the focus is on the need to expand enforcement, the use of a Systematic Alien Verification for Entitlement (SAVE) program and the creation of a biometric data tracking system akin to the one already in place at airports.

Recall that House Leader John Boehner lost his position largely because, in his immigration reforms, he was considered too soft, including even those of his proposals that emphasized border security as the prime criterion. His plan denied any path to citizenship for anyone who had arrived on American soil illegally.

Donald Trump differed in only details – the wall should be higher and stronger. The Mexicans will pay for it. At heart, it was the same hardline Republican Party doctrine on immigration, but blasted out at many decibels higher as a boast rather than an obvious backhanded trick. Further, while the Boehner platform offered no path to citizenship for illegals, he threw them a bone – which drove his more puritanical Republicans in the House crazy, let alone The Donald himself. No legal path to citizenship, except if “they were willing to admit their culpability, pass rigorous background checks, pay significant fines and back taxes, develop proficiency in English and American civics, and be able to support themselves and their families (without access to public benefits).” On the other hand, Boehner’s plan was even more radical in some ways than ones proposed by other more radical Republican members of the House. For he would repeal the opportunity allowed for an immigrant to sponsor his wife and children.

The evidential irrationality, the huge barriers to implementation, the enormous costs undercutting any self-interest and the inhumanity of the policy proposals that would send the parents of American citizens back to their country of origin, suggests a far deeper motive that had nothing to do with the importance of upholding the rule of law. This was nativism writ large, the flip side of the undercurrent of racism and of birtherism that has haunted the Republican Party and made every day seem like Halloween.

In economic policy, the Republicans have been the clearest and most puritanical supporters of lower taxes, reduced guarantees for social security (citizens should be incentivized to provide for their own social security, social and medical benefits), minimal government, and offering the most unregulated environment for the expression of capitalism, including increased regulation for and restrictions on labour unions. Who better to choose to represent the party than a billionaire who has evidently paid no personal income taxes for eighteen years? Republicans support fewer taxes on even the rich who are esteemed as the engines of economic growth. Republicans oppose the Democratic Party proposals to institute a $15 minimum wage. Republicans certainly oppose the Affordable Care Act or Obamacare. Many in the past opposed Medicaid and Social Security. On all these economic policies, Donald agrees with the economic policies of his party.

There is one exception. The Republican Party has consistently promoted free trade agreements. The Donald has pointed to free trade as the cause of the decimation in the rust belt and characterized NAFTA as “a disaster.” “It’s the worst agreement ever signed” – though that is also how he described the Iranian nuclear deal, but, of course, for Donald Trump, there is no contradiction in declaring a large variety of arrangements as “the worst” Speaking of NAFTA, Trump promised, “We will either renegotiate it, or we will break it. Because, you know, every agreement has an end. … Every agreement has to be fair. Every agreement has a defraud clause. We’re being defrauded by all these countries.” With one stroke, Trump upended a Republican long-standing trade policy and wedded his proposal to conspiracy theorists.

More importantly, Trump had followed a long historical precedent going back to Napoleon III of appealing to those tossed aside or whose security has been reduced by the latest revolution in capitalism, what Karl Marx called the lumpen proletariat. Instead of the Hispanics, Blacks, women and gays that National Committee Chairman Reince Priebus had proposed to appeal to in his March 2013 reform recommendations for the Republican Party that recommended immigration reform and policies directed at the inclusion of minorities, Trump went in the opposite direction and appealed to white males who felt their roles had been undermined by a combination of benefits offered to minorities and opportunities transferred to foreign workers. The hollowing out of America’s industrial core, the thinning out of the middle class and the huge increase in the fat cats versus the working poor, the emergence of the new dot com economy and the financializing of corporate America, the resulting dislocation and insecurities reinforced by a weak social security system, produced an earthquake in which the optimism of the American creed came tumbling down in the face of the new Joshua and his populist trumpet blasts.

In doing so, Trump had collected a base that could offer the Republicans a majority foundation just as they had discovered fifty years earlier in the turn to take the old South away from the Democrats. Count the numbers of social conservatives concerned, for example, with abortion and embryonic stem cell research (12%), but who are disproportionately politically engaged (19%), almost offsetting an equal-sized committed liberal population (15% who would never support the Republican Party and are even more politically engaged (21%). Add to that core economic conservatives (10%), also disproportionately very engaged politically (17%). Add the two groups together and this is where you find Trump’s core support of 36% with some disaffection from economic conservatives upset by Trump’s crass populism and his rejection of free trade.

These losses, however, were more than offset by an appeal to the previously politically disaffected financially stressed members of the population who had been left behind by the economic changes underway. If this 13% of the population could be motivated to participate in politics at much higher rates than their traditional reluctance, Trump will have provided the GOP with a third strong leg and built a new and powerful foundation for its future. To retain the religious right, he opportunistically stressed conservative social values, though he was unable to sweep up large numbers of young voters sceptical of big government but liberal on social issues – Sanders supporters. Nevertheless, he had identified a potentially winning combination. For the latter group of Democratic dissenters forced Hillary initially to equivocate and subsequently support the TPP and TIP treaties only if specific modifications are made. These compromises and blandishments are unlikely to mollify the critics on her left while reinforcing the stature of Donald Trump’s unequivocal renunciation of free trade.

The Democrats, in contrast to Trump, relied on a mixture of die-hard liberals (the 21% mentioned above), minorities (12% of voting activists even though they were 14% of the population), and the new millennial left (11% of activists even though 12% of the population) giving the Democrats a 44% base of support, but one which was vulnerable if enthusiasm to vote for “crooked Hillary” were to be suppressed. This became a major goal of the Trump political campaign. Sweep the lumpen proletariat into the party and reduce the turnout for the Democrats by undermining the enthusiasm of the body politic for his opponent. If Trump has a ceiling above which he cannot rise, then lower Hillary’s floor. Get a higher percentage of the population who actually vote to support the Republican candidate. As Nathan Silver has warned, polls that fail to take this enthusiasm factor into account could well be incorrect. The “crooked Hillary” campaign targets the turnout factor for the Democrats while raising the enthusiasm of his own base which does not need any further convincing. His supporters recite the mantra like automatons while Trump runs a do-not-vote campaign targeting voters leaning towards voting for Hillary. You may hate and distrust me, but Hillary is worse.

Then there are the undecided or those who rarely vote. It becomes clear that the goal of each side is threefold: 1) peal away some supporters from the other side; 2) suppress the enthusiasm factor in the opposing camp to decrease the turnout rate of those inclined to support that side’s candidate, and 3) prevent too much slippage to minor party candidates. (For a breakdown in the factions of the American population supporting different candidates with the enthusiasm factor taken into account, but not the slippage element, see “Beyond Red vs. Blue: The Political Typology, 26 June 2014 published by the Pew Research Center for the People & the Press – http://www.people-press.org/2014/06/26/the-political-typology-beyond-red-vs-blue/)

The anti- or pro-immigration bias and the scepticism for or stress on minority rights had already been built-in on each side. “Extremism” on any of these positions might suppress enthusiasm on one side or the other, but the offset would be a boost in one’s own side’s enthusiasm factor. Clearly, we were dealing with a high-risk candidate on one side and a cautious, calculating candidate on the other side. The objective factors mattered far less than how they were perceived. Is it any wonder that substantive issues played such a small part in the debates and the election? Is it any surprise that not one question in the debates addressed the most important issue of our time – human induced climate change?

Take NAFTA. It may not have worked out nearly as well as its architects planned, creating fewer net new jobs than envisioned. But the techies and the skilled who saw their job options increase would not feel as emotional about the new economy as those distressed poorer less educated voters among the 350,000 and 750,000 directly impacted, along with the sales and service personnel that supported them. They fell by the wayside and lost jobs or moved to lower-paying ones. If the latter were combined with resentful whites and religious minorities (as long as one pandered to the social values of the latter), it can be seen that Trump had forged a potentially winning coalition, even though it would be one coming with a handicap. Thus, although the actual impact of the trade agreements and the openness to free trade had been relatively positive, though also considerably smaller than anticipated, the new targeted population became the victims of the relatively modest positive impacts of free trade. Thus, the real potential of an anti-free trade and anti-immigrant posture, whether in the U.S. or in the advanced democracies in Europe that have also experienced the rise of the alt-Right, was apparent to any opportunist.

The contradictions were not so apparent. Increase the number of high value jobs on one side and the number of low-valued jobs on the other side of a border, then not only does each side benefit from the rising tide, but the pressure on immigration is significantly reduced as increased job opportunities open up on the poorer side. Closing off the spigot through coercion rather than through foreign domestic incentives can only come about at enormous direct costs and a multitude of indirect ones so that you end up having a negative sum game for both sides.

To recognize this requires ignoring the lost political opportunity costs. And Donald Trump, with an attention span of twenty minutes, was certainly not interested in that. The same is true of the negative impacts of Donald Trump’s tax policies on the very people he is winning and getting to turn out to his large rallies. This is also true of a decrease in the social safety net for these very populations who will suffer much more than they are suffering now. But if the blame can be displaced and built into the equation from the start, that failure will only result because there is an effort by international bankers, crony capitalists, led by the get-rich-quick through government largesse of the Clinton clan and that of their corporate partners, then the possibility of political victory is enhanced by more economic suffering.

Donald Trump offered an additional new enhancing formula – an anti-imperial and anti-activist American leadership in foreign affairs, but now enhanced by the spectre of an opponent launching World War III. The irony was that Trump preached making America great again as a cover for becoming a mouth piece for the fears that the Putin mafia have been promulgating since 2014 – that of America as the initiators of a new world war. As Russia tests its new ambitions for expansion in the Ukraine and in the Middle East, make America great again became a formula for shrinking America from its global responsibilities. This switchback required extending Barack Obama’s lead in making America small again, retreating from an active interventionist role and paying far more attention to the well-being of one’s own population.

This was a tour de force for it undercut the appeal of the Hillary Democrats to their own left base. But it came at a cost, but one Donald Trump bet would work to his advantage. As Colin Powell, a former Republican Secretary of State, noted in reference to the birther movement, when nativism is combined with “a dark vein of intolerance in some parts of the party,” the party has to engage in some intense naval gazing. But conspiracy theories obviate the compulsion to do so.

Not one of Donald Trump’s competitors for the leadership of the Republican Party recognized this route to the White House. But they had already built into the party an attraction to demagoguery, an absolute insistence on no compromise, even if the cost was a burning political system crashing down upon their heads, a propensity for constructing conspiratorial groupings aimed to deprive Americans of their second amendment rights joined by a scientific conspiracy of leading intellectual figures to foster on a naïve domestic population a myth about climate change. When fostering ignorance at the expense of knowledge, when blaming others at the cost of assuming responsibility, when creating a narrative of a besieged American betrayed by the ruling establishment, the pathway to a potential victory had been forged by the previous leadership of the Republican Party. Trump had simply upped the ante, driving his rivals out of the game. The Tea Party’s fight with the traditional establishment in the party was not intended to but did serve to prepare the ground for Donald Trump by bringing into the party the power of negative thinking, the enhancement of suspicion, the huge increase in mindblindness and the anxiety and insecurity that now undergirds the party.

So when the enthusiasm factor is introduced into polling so that different voters get different weights depending on that enthusiasm, the result of outlying scientific polls show either a victory for Donald Trump or, on the other hand, a narrow victory for Hillary Clinton when she needs an overwhelming win with the consequent win in the Senate and even potentially in the House of Representatives to actually govern.

Racism, the general distrust of government, the insecurities of white males, particularly those who are less educated, as well as evangelicals primed to expect the immanent end of days, have been linked together to create a toxic brew of fear and insecurity, an emotional maelstrom that bubbles like a volcano about to explode and pour its hot lava through the cracks and fissures of the Republican Party. Hence the focus on the after-effects of the Trump earthquake and the shock waves that have reverberated around the world. Hence the sacrifice of reasoning and evidence-based policies for ones that reinforced passion and unbridled vehemence, that emphasize entertainment more than dialogue, that confers authority on celebrity itself. Hence atavistic nationalism rather than just patriotism, xenophobia married to racism and sexism. Hence a political campaign built on grievances and whining. Hence the politics of resentment. Hence the scare-mongering and the rise once again of the Know Nothings. Hence, the discontent with democracy and the faith in a rational voting population.

For those who believe in attachment, who either esteem or long for a strong community, but encounter one increasingly atomized by technology, Facebook and Twitter, the use of coarser language and a reduction in empathy are used to prove that “community” itself is weak and evanescent. The results of economic, social and technological forces have been devastating and prepared the ground for the takeover of the Republican Party, the rise of Trumpism and a divided and meaner polity with civility driven to the margins. Is it any wonder that this Halloween the main ghost is that of Donald Trump?

With the help of Alec Zisman

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Obama and Haley: Part II Economic Policy

Obama and Haley: Part II Economic Policy

by

Howard Adelman

On economic policy, Governor Nikki Haley criticized Barack in six areas: excessive taxation, excessive expenditures, excessive debt, and the failure to provide adequate support for innovation, education and ensuring increasing incomes for average Americans. What did Obama claim about his record on taxes and policies going into the future?

He advocated raising taxes for those who avoided taxes by opening offshore accounts. On the other hand, he also argued that the Trans-Pacific Partnership (TPP) will both make more jobs for Americans, but also cut $18,000 in taxes on products made by Americans. With respect to businesses, Obama argued that his policies were intended to lift up businesses, not oppress them by more taxes, at least those businesses which try to do right by their workers in terms of the rules of the TPP which will recognize the benefits for their shareholders, customers and communities when they did.

Republicans proposed much more extensive slashing of taxes on personal and corporate incomes. Texas Sen. Ted Cruz proposed lowering the rate to 10%, Florida Sen. Marco Rubio proposed eliminating it, while Donald Trump wanted to set capital gains tax rates at 20%.  Who would benefit from a reduction? To a considerable extent, and certainly disproportionately, wealthier Americans! Certainly proposals to cut rates on capital gains and on qualified dividends would as well. After all, almost 80% of federal and state taxes from the latter two sources come from the very wealthy, in fact, the top 1%. Capital gains taxes on assets held for more than a year and then sold, as well as taxes on corporate dividends, in 2003 were reduced to 5% in the lowest two income tax brackets and 15% in other income brackets constituting the vast majority of income from capital gains and dividend taxes. Obama extended these provisions of Bush’s Tax Prevention and Reconciliation Act of 2005 to 2010, but in The American Taxpayer Relief Act (2012) signed in January of 2013, that tax was raised to 20% for those in the highest 39.6% tax bracket. The rich were still entitled to pay 50% of normal income taxes on these two taxes. And the rich were overwhelmingly the beneficiaries of this type of reduction in taxes. (Cf. Thomas Hungerford (2010) The Economic Effects of Capital Gains Taxation.)

If Republicans eliminate estate taxes altogether, federal coffers would be deprived of $30 billion a year. These were figures cited in a New York Times op-ed piece last week by Mike Lofgren, a former Republican staff member who served on both the House and Senate Budget Committees and authored the book, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government. As it is, inherited property is only taxed for capital on the difference between its value at the time the property was inherited and when it was sold at the time it was sold. This means that there is no capital gains tax, that is zero tax, from the time a person acquired the property to the time of his/her death and bequeathing that property to a heir. Hence, the proliferation of “trustee” adults who effectively live as rentiers on the wealth accumulated by the family members who bequeathed them their property.

This supports Obama’s argument that the democratic deficit in American politics is fed by economic distortions and the widening gap between the wealthy and the rest. Cutting taxes is a formula for enhancing the control of money over American democracy, not reducing it. The state would be starved in its ability to do much of anything for the middle and lower classes, quite aside from damaging infrastructure and environmental projects that would benefit all Americans.

In contrast, like the new Liberal government in Ottawa promises to do, Obama did increase taxes on the wealthiest Americans, those earning in excess of $250,000 per year, including decreasing the level of charitable deductions from 35% to 28%. But as he said in a speech when he was first running for election in 2008 (23 October), Obama promised those earning less than a quarter million a year would not pay an additional dime in taxes. That included 98% of small businesses. Joe the plumber would not be affected, only Joe the CEO and Joe the hedge fund manager. In fact, most middle class families saw their income taxes decrease. The typical middle-class family received about $1,000 in tax relief, paying taxes 20% lower than under Ronald Reagan. His original budget gave a tax credit of 6.2% of earned income up to $400 for single workers making less than $75,000 a year and $800 for married couples making less than $150,000 per year.

On the other hand, by eliminating “tax credits that have outlived their usefulness,” closing corporate tax loopholes, and reversing a portion of the tax cuts awarded to the wealthiest 2% of families, the treasury recouped greater revenues overall while cutting income taxes overall, taking a smaller ratio of GDP through income taxes than under Reagan. By reducing net overall taxes at the same time as tax loopholes were closed and tax credits eliminated where they were no longer useful, it is estimated that the government took in or is on the verge of taking in at least 600 billion in extra revenue over the last seven years. Contrast the tax cuts of the Bush administration that distributed twice that amount, about $1.35 trillion over 10 years, mainly to the wealthy, but also families with children. IRS data released showed that the average effective tax rate for the richest 400 Americans rose in 2013, but only to 22.9% compared to 16.7% previously. No wonder the very wealthy and the Republicans that represent those interests have been irate.

What about capital gains taxes, taxes on dividends and estate taxes? On the latter, taxes of 35% on estates and individuals worth over $5 million and on family estates worth over $10 million were restored. Obama when he took office proposed dividend tax rates 39% lower than what George W. Bush proposed in his 2001 budget tax cuts. On capital gains tax, Obama continued the rates set by George W. Bush. It is not clear why since this certainly benefits the wealthy most of all since lower capital gains taxes means a decrease in revenues for the state with no offset whatsoever in economic stimulus though no correlation with decline either. (Cf. Len Burman (2012) “Capital Tax Rates and Economic Growth (or not),” Forbes, 15 March 2012; See also the independent Congressional Research Service (CRS) in its report (subsequently withdrawn under pressure from Senate Republicans), Taxes and the Economy: An Economic Analysis of Top Tax Rates Since 1945 and Small Business and the Expiration of the 2001 Tax Rate Reductions: Economic Issues.)

It would appear that Haley’s criticisms of Obama in this area were simply a repetition of a Republican mantra with little if any basis in fact. What about Haley’s complaints about exploding expenditures under Obama? She certainly has a case for 2009. In seven months, the American Recovery and Reinvestment Act (ARRA) led to over an additional $240 billion being poured into the American economy. In total, by the end of March 2011, over $630 billion additional funds were invested in the U.S. economy. These were not expenditures in the normal sense of the term, but capital investments in infrastructure, in bailing out the automobile companies and saving the American economy. Obama has every reason to boast and no reason to regret making those expenditures (investments), though some criticism seems warranted on who received the benefits of those investments.

What about deficits? The budget was last balanced in 1998, with credit going largely to Bill Clinton even though Republicans controlled Congress at the time, for Clinton had fulfilled his promise of reducing the deficit, as had George Bush Sr., his predecessor. As a contrast, the leading Republican contender, Donald Trump, would add a staggering $12 trillion to the deficit. Though his competitors are all far behind in such an extravagance, the average addition to the annual deficit would be $3-4 trillion. George W. Bush inherited a $236 billion budget surplus from Bill Clinton but by the time he left office in 2008, the deficit was $408 billion and the national debt had doubled. As Mike Lofgren, the Republican budget staffer quoted above, opined, the Republican ritual denunciation of deficits is a fraud. As my son, an economic historian at Princeton wrote me, “It’s the worst kept secret of the last 30 years that the Republicans are reckless on the economy, but they still froth about fiscally profligate Democrats…”

Haley may be much more civil than the current Republican candidates for President, but on the economy she sings from the same denial of economic facts that has become the habit of Republicans. Tax cuts, especially those that are erroneously targeted, undercut the government’s abilities to create and maintain infrastructure and support new initiatives. Ever since the Reagan administration using voodoo economics drastically cut taxes while enormously increasing its investment in the military, the result has been huge deficits and enormous increases in the national debt. In contrast, Obama has reduced both. Conrad Black after Obama’s first year as president lamented that a $10-trillion national debt accumulated from 1776 to 2008 had become a $16-trillion debt while leaving 50 million citizens in poverty and the entire middle class living on an economic knife-edge. However, during Obama’s presidency, the debt has been enormously reduced, though he took his base line 2009 rather than 2008 with some justification since he inherited his economic woes from George W. Bush’s gross mis-management of the economy. In the last year of Obama’s term, the American national debt as a percentage of GDP is lower than in 1945 in spite of the enormous debt accumulated in saving the economy during his first term.

What about fostering innovation? Haley spoke of the need to reignite the spirit of innovation among Americans. Did she have an advance copy of Obama’s speech? Obama insisted that America’s best corporate citizens are the most creative, but nevertheless asked, in similar words to Haley’s: “how do we reignite the spirit of innovation to meet our biggest challenges?” for the “spirit of discovery is in our DNA.” Contrary to Haley, however, Obama claimed that his administration over the past seven years had “nurtured that spirit” by ensuring the internet remained open and increasing access to that internet for students and low-income Americans. Obama launched next generation manufacturing hubs and online tools. In other words, government played a significant role in fostering innovation.

Obama, however, insisted the government could do much more and, in the spirit of the space program that he had cited earlier, he named Joe Biden as head of Mission Control to launch a concerted effort to finally conquer cancer once and for all, just as the government had facilitated landing a man on the moon in just twelve years. The one area, other than health Obama cited, was the issue of climate change where a similar order of commitment was needed, a subject which Haley did not mention. For Obama, climate change deniers were relegated to a lonely existence of the margins as America’s military, business leaders, the majority of Americans and almost the entire scientific community as well as 200 nations around the world agreed that climate change was indeed a problem that had to be solved. There was a bonus in such recognition: America’s businesses, led by America’s spirit of innovation, could and should produce and sell the energy of the future. After all, over the past seven years, investments in wind power had now paid off since wind power was now cheaper than conventional power and employs more people than the coal industry. On top of that, America had cut its imports of oil by 60% and cut carbon pollution more than any other country on earth. Obama called for accelerating the transition away from dirty fuel by putting the costs of pollution on the backs of fossil fuel producers and investing in a 21st century transportation system.

So Obama argued that money will be saved, jobs will be created and the planet will be preserved by such measures. Jennifer Rubin, a right wing economic pundit in her op-ed, “Obama’s challenge: Why give a failed president another chance?” (The Washington Post, 3 September 2012) before his second term election, challenged Obama for falling back on failed policies of raising taxes on the upper income group, expanding investments in teachers and education and enhancing infrastructure investments. Ashe Schow, in her article, “President Obama’s Taxpayer-Backed Green Energy Failures,” in The Foundry (18 October 2012) argued that all the eco-companies in which the U.S. had invested large sums had failed in their initiatives: Geothermal ($98.55 million), Babcock and Brown ($178 million), Ener1 ($118.5 million) (Ener1 was sold to a Russian), Johnson Controls ($299 million) while others filed for bankruptcy – Abound Solar ($400 million) (the company actually only received $68 million when the government cut its loan off) and A123 Systems ($279 million) (the Chinese conglomerate, Wanxiang Group, bought A123 for 1% of its share value at its peak evaluation), Solyndra ($535 million). (For example, http://www.greentechmedia.com/articles/read/nec-snatches-a123-energy-storage-biz-from-wanxiang should be read regarding A123e.) The attacks continued unabated over the last four years paying little or no attention to the data that contradicted their contentions.

After the inaugural address of Obama’s second term, Charles Krauthammer accused Obama of promising “a state-created green energy sector, massively subsidized (even as the state’s regulatory apparatus systematically squeezes fossil fuels, killing coal today, shale gas tomorrow).” (Charles Krauthammer: “Obama Unbound,” Washington Post, 24 January 2013). Capitalists count on most of their investments not paying off but counting on the minority that do. If those government investments are compared to private ones, even though the private sector was far more risk averse, a comparison indicates that government investments, surprisingly, may have been more successful. (World Economic Forum http://www.weforum.org/content/closing-green-investment-gap)

To repeat what I wrote 3 years ago at the time Krauthammer wrote his piece, “The right wing economic critics of Obama’s various economic strategies work by repetition of stock phrases, are selective in their citations, and ignore analyses that might falsify their beliefs. It is possible that their position could be right to some degree. However, they create a caricature. The evidence when weighed does not demonstrate that the economic conservatives are right. Instead the evidence suggests that ideological conviction rather than comparative detailed analyses yield their conclusions.”

Finally, let me add the response to yesterday’s blog before he had a chance to read the above.

I agree Haley deserves credit for being a voice of civility in a party of spoilers.  But she did NOT take responsibility for the GOP being a financially ruinous party.  It is simply untrue that we have runaway spending.  It is simply untrue that the debt is crushing (it is almost back to the pre-2008 levels after a near depression).  It is simply untrue that the US does not innovate.  The world looks to America for the technological and social breakthroughs.  It is simply untrue that “American” taxes are “too high.”  That is utter crap.  What’s America when the top 1% for all intents and purposes pays no tax  anymore?  The New York Times for the past several weeks has been running long investigative articles, backed by peer-reviewed social science research, drawing attention to scale of regressivety of American fiscal (revenue as well as expenditure) policy.

The GOP is not just part of the “Washington syndrome.”  It is the purveyor of a fiction about the nature of the economy that profits from this narrative.  There is an alternative story.  It is this: the US is profoundly innovative and successful.  It is not beset by public debt (it is by private debt — but that’s a separate issue for the moment); it is not crippled by regulations of “Washington bureaucrats” and unions (just to take the example of education which you cite).  Blaming Washington recycles the problem by avoiding it.  The GOP has burnished this anti-Washington message for decades now — ironically, from within the beltway itself.  And the meta-narrative paralyzes by polarizing the very agent we need to be smart and responsive: the state.

So, what’s the problem?  The problem is that the benefits of private sector-driven innovation go to 30% of the population; 30% of the population is struggling to keep above water; 40% is backsliding, some very quickly. The problem is the absence of public goods that distribute the benefits more evenly.  The blame-Washington narrative endorses a view that divests from public goods rather than reframing the social pact for the 21st century.

That’s why America’s cities are in trouble.  That’s why the rich get richer (and contribute less).  That’s why we can be an innovative society while watching the bottom half struggle to keep up and depend on (public) infrastructures from schools to trains that would make a Third World country worry about its future.

Jeremy

 

This blog was prepared with the help of Alex Zisman.