Saturday, June 25, 2011

A Civil Rights Victory in New York, Huntsman Gets in the Game, Miserable Money Malaise

New York Makes it Six
Despite weak national leadership on the subject by President Obama, a courageous New York State Senate voted Friday night to legalize gay marriage in the State of New York. The bill had previously cleared the Democratically controlled state House and passed on a final vote through the GOP-controlled body 33-29, which included the votes of 29 of the 30 Democrats in the body and 4 Republicans who were bold enough to buck their party base and their leadership to do the right thing. An enthusiastic Governor Andrew Cuomo quickly signed the bill and it is now law.

It is worth appreciating just how far we have come on this issue in a short period of time. In 2004, Massachusetts became the first state in the United States to legalize same-sex marriage, but did so through a state court order. This court order set off a fire-storm which, along with some clever politicking by Karl Rove, led to a slew of ballot initiatives in 2004 and beyond which explicitly banned same-sex marriage in 28 states. It wasn't until 2009 that the first legislative legalization of same-sex marriage occurred, with most of New England acting the same year - Vermont, New Hampshire and Maine all legalized through the legislative process although Maine's legalization was overturned by a 53%-47% ballot vote on a proposition to repeal in 2009. Iowa and Connecticut also legalized same-sex marriage by court order. The District of Columbia has also legalized same-sex marriage by city ordinance.

The New York law is significant in several ways. First of all, it is the largest state that currently allows same-sex marriage (California allowed same-sex marriage for a brief period before the now-infamous Prop 8 passed by a narrow 52-48% vote in 2008.) Secondly, it is the first time ever that a Republican-controlled state body has passed a gay marriage bill. The 4 Republicans who crossed over deserve all the credit in the world for their courage, credit I withhold from President Obama, who has been decidedly weak on this issue.

So, here is where things stand as of the New York change:
States/Localities Where Gay Marriage is Legal and Performed: Massachusetts, Vermont, New Hampshire, Connecticut, Iowa, New York, District of Columbia -- 35.1 million people live in these states or 11.4% of the population

States/Localities Where Gay Marriage is Legal But Not Performed (out-of-state gay marriages recognized): Maryland, New Mexico -- 7.8 million people live in these states or 2.5% of the population

States/Localities Without Gay Marriage but With Civil Unions with Equivalent Rights: New Jersey, Delaware, Illinois, Nevada, California, Oregon, Washington, Hawaii -- 74.4 million people live in these states or 24.1% of the population

States/Localities Without Gay Marriage but With Civil Unions with Limited Rights: Colorado, Wisconsin, Maine -- 12.0 million people live in these states or 3.9% of the population

So, cumulatively,
11.4% of the population can get a gay marriage in their home state
13.9% of the population can get a gay marriage and have it recognized in their home state
38.0% of the population has access to either gay marriage or equivalent rights through a civil union
41.9% of the population has access to at least some form of civil union rights

So, we've made a lot of progress but still have a lot to do.

So where are the next fronts in this debate?
(1) The Potential Gay Marriage States
California - a Prop 8 repeal seems likely eventually. The vote was very close in 2008, attitudes have shifted to be somewhat more pro-gay marriage since then and the 2008 vote was ironically hampered by a very high African-American turnout in 2008 (African-Americans are overwhelmingly opposed to gay marriage but tend to break liberal other than that.) 2012 wouldn't be the ideal time to try, but 2014 might be.
Maine - the last vote in 2009 was only 53%-47%, a new vote might yield a victory for gay rights advocates at the ballot box.
Rhode Island - recent polling indicates strong support (60%+) among the voting population there, although the actual avenue would likely be by legislation through the state house.
Illinois, Washington, Oregon - all states with full civil unions where there is public support for gay marriage (I exclude New Jersey from this list as gay marriage likely has no chance as long as Chris Christie is Governor)

(2) Next Frontiers for Civil Unions
States where civil unions would likely have public support but are probably not ready for gay marriage include a lot of traditional swing states:
Pennsylvania, Ohio, Michigan

(3) The Constitutionality of the Defense of Marriage Act
This act, cowardly signed by President Bill Clinton in 1996 permitted states not to recognize gay marriages performed elsewhere. I've been amazed that this issue has not made it to the Supreme Court, as it seems, on face, to be flagrantly unconstitutional. Article 4, Section 1 of the constitution states:
"Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof."

The so called "Full Faith and Credit" clause is crystal-clear to the average person. States must honor contracts, legal proceedings and public acts performed in all the other states. It is the basis of our system of rights and property laws. And gay marriage is clearly all three (a contract, a legal proceeding and a public act.)
The Defense of Marriage Act itself quotes the Full Faith and Credit clause and claims constitutionality on the basis that the constitution provides congress the right to the Congress to make determinations about what qualifies under Article 4, Section 1. The constitution contains no such language. I've quoted Article 4, Section 1 in its entirety above.

Conservative support for this highly dubious constitutional argument flies in the face of alleged "strict constructionism". The truth is, conservatives seem fine with judicial activism as long as it supports their agenda.

Much more to come on this key civil rights fight.

Jon Huntsman, The Moderate Long Shot
Speaking of gay rights supporters, former Utah Governor and former Obama Administration Ambassador to China Jon Huntsman got in the race this week. Huntsman is a long shot, for several reason. The first is that his pragmatic, moderate politics don't play well to Republican primary crowds. Huntsman favors civil unions (the same position, as best I can tell, as President Obama), recognizes man-made global warming and has a history of working across the aisle, great general election qualities but poison pills to the tea party. He also suffers from very low name recognition and crowded space among mainstream establishment Republicans (he looks and sounds a lot like both Mitt Romney and Tim Pawlenty.) I don't expect Huntsman to win, but he is going to be an interesting voice in the debate.

The Rotten Economy
Unemployment still stands at 9.1%. US Economic growth for the first quarter was only 1.9% and expected to be only modestly better in the second quarter (to give you a feel, 3% growth is generally required just to maintain the unemployment rate, 4 or 5% to significantly dent it.)

President Obama is stuck. New stimulus is a non-starter in the GOP House. Tax cuts only pile on to an already untenable deficit and debt load. He's stuck riding this one out. And as we've often discussed, economics are the single most important factor in Presidential elections.

The approximately 3-year stimulus plan that was already passed continues but is almost out of juice. As of now:
Tax Cut Paid Out: $259.9 billion out of $288 billion (90.2% complete)
Spending: $395.0 billion of $499 billion (79.2% complete)
Overall: $654.9 billion out of $787 billion (83.2% complete)

Of course, the GOP and President Obama agreed to a stimulus bill of sorts at the end of 2010 as part of the deal to extend the Bush Tax Cuts for all. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provided for many measures intended to stimulate the economy:
* Extension of Bush-era income and capital gains tax reductions through 2012 as well as a compromise on the estate tax rate
* A "fix" to the alternative minimum tax, which raised exemptions to prevent middle-class families from falling under the tax
* Extensions of the American Recovery and Reinvestment Act's Child Tax Credit, Earned Income Tax Credit, and American Opportunity Tax Credit
* Job Creation Tax Credits, Ethanol Tax Credits and Accelerated Depreciation Tax Credits for businesses
* A 13-month extension in unemployment benefits
* A brand-new, 1 year payroll tax reduction

This was clearly a much more Republican bill than the original stimulus. The original stimulus was 62% spending and 38% tax cuts and totaled $787B in cost.

The 2010 bill was almost as large, costing approximately $671B, but was only 8% taxing and 92% tax cuts. Spending in the bill broke down as follows:
* Provisions extending Bush-era tax cuts -- 46%
* New Middle Class and Working Class tax cuts -- 37%
* New spending provisions - 8%
* Provisions extending Obama stimulus tax cuts -- 6%
* Other business tax cuts - 3%

Arguably, for all the talk of President Obama being a socialist, he has been the most tax-cutting President in US history. The problem is, he also likes to spend. There is some argument for this as a short-term measure to jump-start the economy. But we are way past short-term. We need to solve the structural deficit, not pass another set of tax gimmicks. Any ideas on how to get to a compromise on that one?

Sunday, June 19, 2011

The Trouble with An Innovation Economy, The Entitlement Drag

Innovations Are Great, But the Jobs are in China

I was reading a magazine article the other day on Chinese manufacturing giant Foxconn. You may know Foxconn as the company that manufactures the iPhone, as well as many other high tech electronic devices. You may also know Foxconn as a place that famously had a rash of worker suicides last year, that prompted reforms in pay and work practices. Or you may never have heard of them. I don't have a view on Foxconn as a company one way or another, but the article struck a cord with me for a different reason. It mentioned, in passing, that number of people that Foxconn employs.

Think about this - Apple and Foxconn are approximately the same size as measured by revenues or profits. Apple develops unbelievable innovations - iPods and iPads, smart phones, computers, etc. It is a crown jewel that politicians talk about when the mention American ingenuity and the innovation economy. Foxconn is nobody's idea of an innovator, it's simply a manufacturing firm that leverages cheap labor in China at a lower cost than competitors in other countries can.

Here is the problem...Apple employs 30,000 people, Foxconn employs 1,000,000. Granted, the 30,000 people at Apple by and large do very well. Senior management has made themselves very rich. Even middle management and the programmers that build the innovation make excellent livings and get great benefits. It's a heck of a lot better to work at Apple than Foxconn, no doubt. But only 30,000 people get to live an Apple-sponsored lifestyle.

It's hard to build a middle class economy this way. Apple is a giant technology company. At 30,000 per company, you'd 493 new Apples to employ all the unemployed in this country. Never mind the fact that most of the unemployed would be vastly unqualified for a job at Apple.

My point is that we need to be more than an "innovation economy" to be sustainable. Innovation is great, but if we export the manufacturing to China and the customer service to India, then a small group of people in the US will get rich on the innovation, but the rest of the country won't benefit.

We would be wise to steal a page from Germany's playbook and invest in some real industrial policy. Germany has done an outstanding job growing high-dollar manufacturing jobs by investing in its industry and its trade education. Alas, I fear in the current Washington gridlock, that ideas like this are a complete non-starter.

Would you like fries with that?

The Entitlement Drag
If we spend all our money on Social Security, Medicare, Medicaid and Unemployment Benefits, how will we ever invest in the infrastructure and the education needed to build a full employment economy?

Our mass transit systems are far inferior to Europe and much of Asia. Our air traffic control system is from the 1950s. Our power grid is still largely powered by coal plants built 100 years ago. Funding for education at all levels is being cut.

We used to find ways to invest in big things - the Apollo missions, the Eisenhower Interstate system, the precursor to the internet. Now, I fear, we are spending too much money just on social programs which have no long term payback. No, I don't favor slashing and burning the social safety net - it's part of the values of a modern society. I'm just saying we need some balance. And probably some higher taxes to pay for it. Another non-starter these days.

Monday, June 13, 2011

Romney Owns

Short reaction to the first GOP debate (yes I know, it's technically the second one, but the first one where the field showed up): I don't see a credible threat to Mitt Romney for the GOP nomination. He was funny, engaging, well-spoken and gave smart, concise answers even when dealing with thorny issues, such as Romneycare and his flip-flop on abortion. He looked and sounded Presidential. No one else on the stage was even close.

Jon Huntsman? Rick Perry? The field is wide open. You just have to beat the Mitt.

Sunday, June 12, 2011

Gingrich Falls, Weiner Tweets, The Economy Sputters

Just to Reiterate, Newt Doesn't Have a Chance
Last week, I had him third in a very weak field of declared candidates, a distant third to the close-to-insurmountable Mitt Romney and the far behind but highly credible Tim Pawlenty. Apparently his closest advisers agree that things are not going particularly well for the one-time Speaker of the House in his bid to become the GOP nominee as 7 of his top guys all resigned on the same day this week. A few are presumed to be going to work for Tim Pawlenty, a few others are rumored to be in talks with Rick Perry if he decides to mount a run. Either way, those closest to the Gingrich campaign appear to want nothing to do with it. And why should they? In national polls, Gingrich is not only getting trounced by declared-candidate Romney, he's getting trounced by unannounced candidates Palin and Guliani, and even getting beat by sideshows Herman Cain and Ron Paul. Gingrich will likely not win a single nominating contest and should be gone after South Carolina, if he doesn't pitch in the towel sooner.

Anthony Weiner, The Sad Clown

Call it the curse of technology. Call it the oldest fault in men since time began. Either way, once well-respected Rep. Anthony Weiner (D-NY) is now a sideshow. His sexting with at least 6 women over the past 3 years, including sending explicit photos has everybody and their brother calling for his resignation, including virtually all high profile Republicans and high profile Democrats such as House Minority Leader Nancy Pelosi (D-NY.)

What Weiner did was incredibly stupid. I always say that the internet is written in ink and you'd best not do anything on there that you wouldn't want your mother to see. Pictures of your erection certainly qualify there. Having said that, I'm not sure I'm on board with the Weiner resignation brigade.

It is not clear to me that Weiner has done anything even remotely illegal. It does not appear that he used government resources in his sexcapades. So at the end of the day, if all he did was send dirty photos, are his actions really so much worse than what the likes of Bill Clinton, Newt Gingrich, and a whole host of other politicians did, who actually had sex with women while in office and stuck around? And how exactly does this effect if Weiner is a good congressman?

I guess we still have a strong puritan streak in this country.

Unemployment and Slow Growth - Not a Good Recipe for Obama
The President has to be fearful about the economic news of late. 1.8% GDP growth last quarter. Unemployment at a virtual flatline for the last several months right around the 9% line (9.1% last month, according to the BLS), nearly 2x what a healthy economy would be. Even the stock market, which had been the bright spot, has started to sputter with all the bad news.

If the election is going to come down to the economy, as I firmly believe it will, President Obama is going to need for things to be better a year from now than they are today, or he may find himself designing a Presidential library in Chicago.

Sunday, June 5, 2011

Meet Your GOP Field, Debt Ceiling Chicken, Some Easy Predictions

The GOP Field is Set, Sort Of, Maybe
We have gained a lot of clarity over the course of the past few weeks about who is in and who is out in the race for the GOP 2012 Presidential nomination. The Huck isn't running. Neither is Trump (read back to my earlier posts when he first started making noise if you don't already understand why.) Daniels is sitting this one out. It's actually a pretty thin field as it stands. There are five meaningful players who have not made decisions yet. Accordingly, here are my power rankings of the "in" and the "maybe" candidates.

The "in" candidates:
1. Mitt Romney - the clear and undisputed front-runner. Yes, he used to be a pro-universal health care, pro-choice, pro-gay rights, Massachusetts moderate. But, let's face it - an attractive face with business experience and a strong governing record is a pretty good place to start for a party that actually wants to win.

2. Tim Pawlenty - if Romney stumbles or health care becomes too much of an issue, Pawlenty is the other "legit" candidate. He has gubernatorial experience, he is liked both within the party and popular in his home state. Pawlenty's biggest problems are a. that he backed cap-and-trade at one point, b. that few outside the mid-west and the party loyalists know him and c. he isn't particularly charismatic. He's going to have to count on a Romney slip-up to get seriously in the game.

3. Newt Gingrich - the highly intelligent but deeply flawed Gingrich is clearly qualified as former Speaker of the House. He is also a pretty famous jerk, both personally and professionally. His personal life will dog him in the GOP primaries including his two failed marriages, his cheating and his overall lack of personal morals. He is also not very inspirational and highly confrontational. I can't seem him winning, but outside of Romney and Pawlenty, he's pretty much the only other credible candidate.

4. Ron Paul - the ever-entertaining libertarian is running again. He will make some noise, raise some money and even get some votes (heck, he could finish 2nd in libertarian-leaning New Hampshire!), but he can't get the nod - he would be a disaster for the GOP if he did.

5. Herman Cain - Cain is a great speaker and lit up the first debate, but he's hard to take seriously as a candidate. No experience governing and if you peel back the brilliant surface rhetoric, he's not particularly insightful. He'll be fun to watch, like Paul, but will be a sideshow.

6. Gary Johnson - if you took Ron Paul and subtracted the wit and charisma, you'd have Gary Johnson. Another devoted libertarian, Johnson will create havoc for some of the front-runners, but will get few votes, thanks to the much better known and far more entertaining Ron Paul.

The "maybe" candidates:
1. Rudy Guliani - shockingly, the 2008 electoral disaster hasn't kept Guliani from polling near the front of the 2012 field. He could be a real player, but I'm left with the following question: if the GOP didn't like him in 2008 and he hasn't done much since, why will they like him now?

2. Michelle Bachman - the darling of the tea-party could make some noise. The tea-party has shown its muscle over and over again in GOP primaries. Bachman winning the nomination would be a disaster for the GOP, however, as she would likely get absolutely torched in the general.

3. Jon Huntsman - the erstwhile Obama Administration Ambassador to China is actually just the sort of general election candidate the GOP should want. He's a center-right candidate who works extremely well across the aisle and has a proven ability to govern. But can you imagine the GOP nominating a former Obama Administration official who is a social moderate? Me neither.

4. Rick Perry - the conservative Texas Governor is one candidate I've had my eyes on for a while. He's the perfect intersection for the GOP of a candidate with conservative enough chops to be appealing to the tea party while being mainstream enough to not freak out the general public. Still - nobody knows Perry and it isn't totally clear he is even interested.

5. Sarah Palin - her star has faded fast. I admit to being wrong about her - I warned not to underestimate her in 2008, but she has been a paper tiger with frequent gaffes and no depth. Besides, she's making too much money at Fox to run.

6. Rick Santorum - he's a complete afterthought. His far-right social views may appeal to some on the fringe, but other candidates will have that space well covered and Santorum couldn't even run competitively for re-election in Pennsylvania. He shouldn't waste his time. And don't Google his name unless you have strong intestinal fortitude.

The GOP is Playing Chicken - And It May Work
The US Government has hit its debt ceiling, but Congress seems in no hurry to act. Tim Geithner has given an approximate "real" deadline of August 2nd, which the government can get to by stopping payments to pension funds and deferring other short-term payments. The bottom line is that the debt limit will have to be raised as no one has proposed anything approaching a budget that is balanced for this year -- even the most conservative proposal for the Fiscal 2011 budget called for about a $1.4T deficit and the one enacted was slightly more moderate than that. But Republicans are staging grand theater, holding symbolic no votes on a ceiling increase with no spending decreases attached and demand major reform to everything except taxes.

So what do we make of all of this? The GOP isn't trying to destroy the country, I don't think and will therefore make sure that the debt ceiling is increased prior to August 2nd. A compromise that allows all sides to save face will likely occur, which will likely involve big planned defense reductions, big reductions in domestic discretionary spending, token changes to Medicare and no change in tax policy. This is the middle ground that both sides can probably live with, although it will likely leave the two biggest problems with the budget - taxes and entitlements, mostly unchanged.

Be prepared for action to come at the very last minute, so expect at least another month and a half of wrangling before we throw together a short-term fix.

Some Easy Predictions
Allow me to stick my neck out. Write me later when I'm proven to be an idiot:
(1) Mitt Romney will win the GOP nomination -- why? There is nobody credible enough to beat him. Besides, he's the "next guy in line" (read my posts from 2008 to understand how important this is to GOP nominations.)

(2) The debt ceiling will be raised prior to August 2nd. See above.

(3) The Democrats will not retake the House and will lose the Senate in 2012. Read my prior posts - the map is just awful for them.

(4) The Presidential race will be within 5% and the key states will be Virginia, Colorado and Ohio, not Florida and Pennsylvania.

(5) Sarah Palin won't run for President.

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