I'm Back! Let's Get Down to Electing!

First of all, a brief note on my absence from the blogosphere these past couple of months.  My closest friend passed away recently and I have been preoccupied with things that take precedence over discussing the issues of the day.  That is all behind me now (although he will certainly never be forgotten) and it is comforting to come back to a topic that I love: American Politics.

In my absence, I missed most of the budget and debt ceiling fight.  I don't have a lot to add that hasn't already been said - the Republican Party got its head handed to it by having an awful, unachievable strategy.  Their failure in the stand off was about as complete as a failure can be in the political arena.  Having said that, I suspect that the electoral impact of the fight will be far less than most Democrats are hoping.  November 2014 is a LONG time away in political terms and I suspect that this won't be a game-changer with the likely outcome still being Republicans retaining the House and the Democrats narrowly holding the Senate.

I also missed the disaster of an early roll-out of Obamacare.  And it has been a disaster.  0 points for execution.  I will simply make three points around this:
(1) The rollout woes, while important, are not the determination of the success of the program or whether it was a good idea or not.  You can have a great idea poorly executed or an awful idea well executed.  This one is probably more like a mediocre idea poorly executed.
(2) To Republican piling on to the Obamacare solution on premium subsidies, I'm curious - how does Medicare Advantage work?  What about the Paul Ryan budget proposal on Medicaid?  Seems like premium support is pretty much a conservative idea.  A much simpler, liberal idea would have been single-payer.  Single-payer has its own drawbacks, but to bemoan Obamacare's complexity as liberal governance is disingenuous at best and an outright lie at worst.
(3) The "if you like your insurance you can keep it" quote will haunt Obama much more than the poor performance of the website.  There are legitimate reasons under the public-private model advanced in Obamacare to cancel existing policies that don't meet the bill's standard.  But Obama knew this a long time ago.  His promise was an outright lie, and people are likely to remember the lie long after they forget the website hassles.

On to the elections.  Up tonight, we have:
(1) New Jersey Governor - incumbent Republican Chris Christie will absolutely cruise to double digit victory tonight, buoyed by strong support from moderates and independents (including myself.)  The 2016 standard-bearer of sane Republicans (along with possibly Jeb Bush) will have the bully pulpit of the Governor's mansion to speak from.  It will be an epic crushing by a red politican in a blue state.  Take note Republicans - sane candidates like Christie win - wing nuts lose.
Polls close at 8 PM Eastern
Prediction: Christie +24.1% (no, I'm not joking!)

(2) Virginia Governor - Terry McAulife
In what has now become the nation's hottest swing state, one of the ugliest contests between two of the worst candidates for governor in recent memory will draw to a close with former DNC chair Terry McAulife edging out wing nut Republican Ken Cuccinelli (see above about who wins and loses) by solid single digits but failing to win an outright majority as a bunch of fed-up voters dump the two major parties and vote for the Libertarian, Robert Sarvis.  Sarvis is polling in the high single digits, but historically in state races, independents tend to underperform their polling as people break back to the parties late.  It's a non-statistical guess, but I'd wager that Sarvis' election-day support dwindles down to 5-6%.
Polls close at 7 PM Eastern
Prediction: McAulife +6.4%

(3) New York City Mayor
Democrat Bill DeBlasio will cruise to a 30, 40, maybe 45 point victory.  The margin doesn't matter.  The outcome is assured.
Polls close at 9 PM Eastern
Prediction: DeBlasio +41.2%

Lots of other stuff on the ballot including marijuana taxation in Colorado and a minimum wage hike in New Jersey.  I'll keep you posted throughout the night.

20 minutes until the first returns....

My Apologies to the Readers, Why the GOP is Failing, Worse Than Damn Lies on the Minimum Wage

Sorry I Missed You
There were many visitors to this space the night of the State of the Union.  Most years, I cover the State of the Union, as I do all major American political events.  It was simply personal circumstances beyond my control that caused me to miss the speech (which I was just finally able to watch, along with Marco Rubio's Republican response.)

I am continually humbled by the number of people that come here to learn a little bit more about our Republic and its politics.  I am sorry to have missed you this State of the Union.

Where is the Optimism?
The Republican Party has been out in the wilderness for a little while now.  They have been out of the White House for over 4 years now, have not controlled the Senate in over 6 years and have controlled the House for only 2 of the last 6 years.

This is hardly unprecedented in US politics.  The Democrats were cast from the White House for all but 4 of the 20 years from 1973-1993, when a young Governor from Arkansas named Bill Clinton revitalized the Democratic center coalition.

Republicans were completely out of power in both Houses of Congress all the way from 1955 until the Reagan revolution coattails swept them into power in the Senate in 1981.

The Republican Party certainly has the capability to return to power.  We are naturally a nation of economic conservatives (at least as compared to our first world allies) and while demographic shifts appear at the moment to be a huge headwind to the GOP, the growing Latino voter base is largely socially conservative and family-oriented, a seemingly natural constituency for the GOP.

But right now, the GOP isn't helping itself.

What Bill Clinton for the Democrats and Ronald Reagan for the Republicans had in common when they led their parties back from the wilderness was optimism.  They had powerful, positive visions for the country and sold them with a smile.

Voters are drawn to optimists.  They tell us about what is possible.  They propose solutions to seemingly overwhelming problems that sound reasonable.  They stoke our patriotism.

Pessimism doesn't sell.  It implies a lack of faith in our nation.  It promises a bleaker future.  It isn't a product anyone wants to buy.

And herein lies the core problem for the GOP - a lack of optimism.  From chattering heads to internet message boards to elected officials, the words coming out of the GOP imply that we are going to hell in a hand basket.  This is a natural extension of very overheated rhetoric in both the 2008 and 2012 campaigns.  The thinking goes - President Obama is a socialist or even a communist and we've been saying for years that if he got into office, he was going to wreck the country, so it must be true.  I think Francois Hollande is laughing somewhere at the notion that the President is a socialist.  We debate the difference between 35% and 39.6% marginal tax rates - the French impose top taxes of 75% when they get a "real" socialist in office.

The man or woman who can step forward and paint a truly optimistic vision for the country will emerge as the natural leader of the GOP.  Based on the State of the Union response from Marco Rubio, which was a drab and uninspiring affair, I do not believe that man will be Marco Rubio, at least not yet.  I'd look to the Governor's mansion, where you have people building that optimistic vision.  Think Bobby Jindal, Chris Christie and Mitch Daniels.  Pragmatic men who work hard to build better states.  Leave the Tea Party and the wingnut survivalists behind and you have a path back to leadership.

Is the Wall Street Journal Ignorant or Dishonest?
I like the Wall Street Journal.  While they have a clear conservative bent, they provide excellent reporting on the world of business and do strong investigative journalism into corporate wrongdoing.

So it is quite disappointing to me that they would publish a highly intellectually dishonest commentary on proposed minimum wage hikes entitled "The Minority Youth Unemployment Act".  In the piece, the Journal argues that hiking the minimum wage would lead to fewer available minimum wage jobs, which would disproportionately impact young minorities.

It was once said that in the order of significant lies, there are lies, damn lies and statistics.  Such is certainly the case with the Journal piece.

Firstly, they present a graph that shows minimum wage hikes and black youth unemployment and total you unemployment plotted on a timeline from 2007 to the present, with hikes in the minimum wage from 2007 to 2009 noted on the graph.  The point the author attempts to make is that youth unemployment spiked from 2007 to 2009, correlated with the rise of the minimum wage from 2007 to 2009.

The chart is factual but wildly deceiving.  Any first year statistics student knows that correlation does not imply causation.  Murders and ice cream consumption spike at the same time every year, but no fool things ice cream causes murder, the thoughtful realize that both spike in the summer for different reasons.  Certainly, the minimum wage went up during that time period (due to a bill supported and signed by President George W. Bush, incidentally), but there was also this little financial crisis that led to the Great Recession.  Does anybody with connected brain cells not think that the financial crisis led to the spike in unemployment?

To punctuate that point, note that the author singles out just one set of minimum wage hikes and does not chart the countless other minimum wage hikes and corresponding unemployment rates.  The hike from 3.80 to 4.25 in 1991?  Unemployment crashed after that one on the heels of an economic recovery.  The successive hikes from 4.25 to 4.75 and then 5.15 in 1996 and 1997?  The economy recorded some of the lowest unemployment rates in history following those hikes.

Bottom line, cherry-picking only the data that support your point of view is the type of deception that should be reserved for political spin doctors, not publications that are ostensibly paragons of journalism.

The premise of the article, that higher minimum wages lead to employers refusing to hire workers also defies logic.  As any first year business student knows, businesses exist to make money.  They don't generally employ workers that are unnecessary.  If a hotel needs 5 maids in order to clean all the rooms, they are going to hire 5 maids, whether the minimum wage is $7.15 or $9.00.  They aren't going to hire 5 extra maids that they don't need if the minimum wage is lower. Likewise, they aren't going to hire 3 maids and simply not clean some of the rooms if the minimum wage is higher.  They are going to hire the people that they need.

What is true is that if labor costs rise, those costs will be passed on to consumers in the form of higher prices for things that require minimum wage labor, such as hotel rooms and fast food meals.  Companies still want to make their profit, so they simply mark up their items to maintain their profit margins.  This essentially amounts to a tax on all of us to support slightly higher wages at the bottom rung.

This is a trade-off that we have been willing to make as a country since 1938, when the first minimum wage law went into effect.

The minimum wage is near historic lows at the moment.  In real dollar terms, the minimum wage was $7.33 in 1950, slightly higher than today.  In 1956, it was then hiked to the equivalent of $8.57 in today's dollars and continued to rise from there in real dollar terms, peaking at a real-dollar rate of $10.74 in 1968.  It remained above $9/hour in real terms until 1981, when Ronald Reagan essentially put a freeze on minimum wage hikes, allowing it to fall in real terms (thanks to inflation) to under $6/hour in real terms before President George H.W. Bush signed a hike.

If higher minimum wages lead to higher unemployment and lower minimum wages lead to lower unemployment, unemployment should be near historic lows.

The Wall Street Journal article is dishonest and wrong.  I would like to hope this was out of ignorance, but given the depth of experience on the Journal editorial board, I suspect it was deliberately deceptive.

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Stimulus Ends Fiscal Year at 21.4% with Surging Unemployment, Presidential Approval Holds Ground, 47% Tax Free?

Stimulus Is Spending, But Is It Stimulating?
The American Recovery and Reinvestment Act ended the 2009 Fiscal Year for the Federal Government with $106.9B in money spent (21.4% of the $499B total in the bill) and $250.6B authorized (50.2% of the bill's total.)

This is more or less on track with the projections from when the bill passed -- a sizable, but not overwhelming chunk spent in Fiscal 2009, the bulk of the money spent in Fiscal 2010 and some trailing expenses in Fiscal 2011. This structure, as you will recall, was the subject of a lot of debate while the bill was moving through congress, with Republicans claiming the impact wasn't nearly fast enough to be truly stimulative.

So the bigger question for this large investment is, is it working?

It's a tough question to answer, since we will never know what the economy would have looked like without the bill. On the one hand, we have obviously seen a stabilization in the economy. The GDP shrunk at only a 0.7% in the second quarter (after crashing around 6% in the prior two quarters), and is expected to have grown in the third quarter "officially" ending the recession. However, unemployment (as it often does in a recession), continues to raise, climbing to 9.8% in September, a new high-water mark for the past 25 years. And wasn't this supposed to be a jobs bill, after all?

I don't know the ultimate verdict on the stimulus, but when I look back to where we were earlier this year, I know action was necessary. And I know a lot of the structural projects funded were very necessary. While I would have liked to see less temporary tax cuts, which are of marginal effectiveness at stimulating the economy in my experience, and more of the programs that seemed to work very effectively, like cash for clunkers and infrastructure spending, on balance, I still believe the stimulus as it happened is far superior to having done nothing.

But it will be all for naught if employment doesn't improve eventually. People are still suffering a lot and not too many feel a lot of "recovery" yet.

President Obama -- A Narrative by the Numbers
Looking at President Obama's monthly averages for his approve minus disapprove.
I. The Honeymoon Wears Off
Almost all Presidents are very popular when they start. It's a natural thing -- we want to root for the new guy to be successful. But, generally in the first few months of the Presidency, as the new President starts to take action, those on the opposite side of the aisle remember why they voted against him. This happened to President Obama as he dropped from +48% his first month in office to +33% in March. Still very popular, but not the near-unanimous support he enjoyed upon taking office.

II. The Stable Spring
President Obama appeared to be holding his own. His numbers slipped slightly during this time period that saw the economy bottom out, but largely people continued to like the new President and believe that he was doing the right and necessary things to fix the economy and country for the long term. He averaged +31% from March-May.

III. Wheel Come Off Health Care
Tea parties, town hall protests and a White House under fire. President Obama had a very bad summer. His numbers went into free-fall, crashing all the way to +12% in August.

IV. Back to November 2008
In a theme, I've been following, President Obama's numbers appear to have stabilized at near his November vote margin. He was +12.3% in August, an identical +12.3% in September. He is showing better in October at +15.0%, but this is a very small data set, based upon two days (although all of the averaging and weighting techniques give that number some credence.)

These phases are illustrated on the chart below.

The President's daily average as of today stands at +14.8%, still comfortably ahead of his margin in November. In fact, at this margin, if an election where held today, he would win all the states that he won then, plus Georgia and Montana.

Of course, the election is not being held today or anytime soon. But the point is simply that the President's political capital has stabilized.

Where it goes from here depends a whole lot on the economy and the fate of health care reform.

47% Pay No Taxes?
CNN / Fortune report recently showed that 47% of American households will have either a zero or negative (due to refundable tax credits) total income tax liability in 2009. That is a staggering number on face and has led many conservatives to question a tax system that does not require contribution from almost half the population.

There is some merit to the conservative argument, but let's first heavily caveat the situation. Saying that 47% of Americans pay no taxes is not an accurate statement. Everyone who has made a dollar of income will pay payroll taxes. Social Security taxes stand at 6.2%, Medicare taxes at just over 1% and both of those have an equal "employer side" tax, which effectively means that a workers pay is reduced by twice that amount. So, let's start by agreeing that everyone who is working, is actually being taxed at close to 15% right off the bat.

In addition, we all pay federal taxes on all sorts of federally taxed goods, from gasoline to alocohol to cigrettes (okay, non-smokers and non-drinkers that don't own cars don't pay these, but you get the point.)

Having said this, I find this trend disturbing. Income taxes are still the federal government's largest source of revenue. The middle and upper middle class are the ones who are most scorched by our tax burden -- people rich enough to pay a 28% marginal income tax rate, but not rich enough to hit the caps on Social Security taxes. In total taxation terms, the bottom quarter pays the smallest percentage of their income, then the top quarter the next smallest and the middle half the greatest.

I propose we fix both problems. Let's establish a good, progressive tax structure that is all encompassing. There are several ways to do this. One would be to reform income and payroll taxes so that we have one all-encompassing income tax that has fewer write-offs and a clear structure (say 0% of poverty-level income, 25% of income above poverty level and 40% of income about $250K.) Another alternative would be to use a VAT or National Sales Tax as a substitute for the income/payroll tax structure, but exempt essentials such as food and clothing from the tax to prevent if from being regressive.

Neither of these options are politically likely, so let me propose one that might actually fly:
(1) Eliminate the cap on social security and roll back the Bush tax cuts on upper-income individuals (fixes the upper-income problem)
(2) Slowly unwind the refundable tax credits for those making more than poverty level income
(3) Raise the minimum wage so that fewer people operate below the poverty level

I realize raising the minimum wage while unemployment is still high is dicey. But there is no credible emperical evidence that minimum wage hikes in the past have led to conservatives' worst fears, increased unemployment and lower hiring. I'd actually argue that a deflationary cycle such as the one we are in now is the IDEAL time to raise the minimum wage, since the primary risk of rising wages is inflation.

At any rate, whether these options or others are taken up, eventually congress will have to tackle the mess of our tax code. President Bush appointed a blue-ribbon commission, whose findings where promptly ignored. Perhaps President Obama can do better. Although recent experience with Health Care doesn't inspire much confidence.

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