Romney

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Puff The Magic Romney

Well what a week that was. Mitt Romney has not yet lost the election, but he has come perilously close. If he pulls out a win, which is now looking like a long odds bet, it will not be because of his economic plan. This is because he doesn’t have one. Or, rather, that his plan is vacuous, vague, incoherent, and lacking in anything we can reasonably call a plan.

Or perhaps I just misunderstand what a plan is.

In my lexicon a plan is something with concrete steps – causes – that have some semblance of connection with a desired results – effects. Cause and effect. I realize in this uncertain world that plans have to have some latitude so that the unexpected can be accommodated nicely within the overall goal, but the entire plan ought not to consist of latitude. There’s such a thing as being too loose.

And Romney’s plan is loose in ways that make it impossible to understand.

The main thrust of it is that simply by ousting Obama things will look up. That is to say that our business leaders are so in a funk over Obama’s supposed anti-business rhetoric and policies that once he is swept away they will stop cowering and sulking and come roaring to life. They will repatriate all their off shore bank accounts. They will unleash the hounds of investment. They will build new factories, buy new equipment, open up the throttle and drive us happily out of the doldrums.

This is stupid. And it’s not a plan. But it is exactly what Romney appears to believe. In which case he is an incompetent dolt, and an ignoramus to boot.

Which he is not.

So why the stupid plan?

Because he is strapped into the cockpit of the Republican party’s economic aircraft, which, dodo-like, cannot fly. Ever.

The rickety contraption called  Republican economic policy is riven through with massive contradictions. It is a kluged together mash-up of  elements each of which is designed to appease a different part of the whacky coalition we know as the Republican party. And since that coalition is full of disparate and often contradictory pieces, so too is its economic platform.

So continued tax cutting sits uncomfortably beside budget austerity without any attempt to reconcile the yawning gap between them. On the one hand the Republican party’s rabid Tea Party base wants lower taxes – especially for the ‘job creators’ – and on the other it’s ultra conservative fiscal hawks want to balance the Federal budget. Without cutting defense spending of course. This is simply not plausible without gutting Federal entitlement programs, which the libertarian part of the GOP salivate at, but nowhere does Romney mention abolishing those entitlement programs. Instead he talks about ‘reform’ of insufficient scale to close the budget gap his proposed tax cut would open up. Worse, he attacks Obama for having cut those entitlements – wrongly as it turns out.

If part of the Republican plan to balance the budget they will cause first to make worse is by slashing entitlements, then criticizing Obama for slashing entitlements is not a very clear way of articulating what they plan. In fact it is lying.

But at least they are lying with some clarity.

The rest of the plan is foggy to say the least.

It really can be summed up as a confidence trick. It relies entirely on the boost in confidence that business will get – presumably – from ditching Obama and his socialist ways.

It takes a very complex mind to take the current economy, in which business investment is growing decently, where profits are strong, and where banks are knee deep in resources awaiting lending, and make the lack of investment, profit opportunity, and loans the source of all our problems.

Maybe complex is the wrong word. Perhaps deluded is better.

The problem the Republicans have is that they have become the poster child for one trick ponies. They have precisely one economic policy. Cut taxes. They remind me of Samuel Beckett when he talked about failure as being worthy if we learn from it. His saying was: “Try again. Fail again. Fail better.” The Republicans have turned this into “Try again. Fail again. Fail again. Fail again …”. They forgot the better part. They forgot to learn. So they are stuck with a self-contradictory policy that we know, a priori, will fail. It has failed in the past. Re-branding it the ‘Ryan Plan’ doesn’t alter its rottenness. Call it ‘supply side’. Call it ‘trickle down’. Call it what you will. It still won’t work.

The deeper issue for the Republicans then becomes clear. They cannot solve our problems because they are ideologically committed to the course of action that created those problems. So they are boxed in. The facts don’t fit their narrative, so they are forced to invent facts. Hence the slurs against Obama. Hence his demonization as being anti-business, when in fact he is nothing of the sort.

This is not to argue that confidence and expectations are not part of economics. They are. But business expectations are far more pragmatically based than right wing economists and politicians like to believe. They are based on hard-headed estimates of demand. Absent the prospect of strong demand and any sensible business leader will avoid the risks associated with new investment. Instead they will try to squeeze every last drop of profit from their existing operations. They will cut costs, lengthen the work week for existing employees, use older equipment beyond its original expected life, and otherwise coax cash out from the corners they would normally ignore.

This pragmatic picture fits well with the data. It is exactly what we would expect to see were demand the driver of activity. It is exactly what we find when we examine the facts. We do not live in a supply driven economy. We live in a demand driven economy. One where the Republican economic ideology does not fit. Which is why, ever since Reagan first foisted it upon us, it has failed – repeatedly – to deliver the nirvana we were told it would. Instead it has delivered huge inequality, social regression, and hardship for everyday workers. We got the unintended consequences – and I am being polite – without any of the intended consequences.

In face of these facts it is hardly surprising that Romney cannot articulate an economic plan worthy of being called a plan. He couldn’t. It isn’t possible. So he is condemned to being vague, vacuous, and incoherent. He doesn’t look comfortable with his situation. He is far too much of a control freak to feel at ease with the mess that is Republican economics.

But that’s his problem, not mine. So I don’t care about that.

It also means he’s being dishonest. And that I care about.

He deserves the mess he’s in.

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Romney’s New Plan – Same As The Old Plan

Well then. Now we know. Last night Mitt Romney gave us an unequivocal plan that will, he assures us, generate about 12 million new jobs during his first term. Here it is:

And unlike the president, I have a plan to create 12 million new jobs. It has 5 steps.

[1] First, by 2020, North America will be energy independent by taking full advantage of our oil and coal and gas and nuclear and renewables.

[2] Second, we will give our fellow citizens the skills they need for the jobs of today and the careers of tomorrow. When it comes to the school your child will attend, every parent should have a choice, and every child should have a chance.

[3] Third, we will make trade work for America by forging new trade agreements. And when nations cheat in trade, there will be unmistakable consequences.

[4] Fourth, to assure every entrepreneur and every job creator that their investments in America will not vanish as have those in Greece, we will cut the deficit and put America on track to a balanced budget.

[5] And fifth, we will champion SMALL businesses, America‰Ûªs engine of job growth. That means reducing taxes on business, not raising them. It means simplifying and modernizing the regulations that hurt small business the most. And it means that we must rein in the skyrocketing cost of healthcare by repealing and replacing Obamacare.

There we are then.

We are going to cut taxes, repeal health care reform, get to be energy independent, have privatized schooling, get all bullish on trade, and we are going to fawn all over business people, especially owners of small businesses and our heroic job creating class.

Yawn.

If this look vaguely familiar to you, don’t pinch yourself. It is precisely the same plan as that put forward by John McCain and George Bush, not to mention Republicans before them going back for decades. The only innovative thought in the Romney plan – as far as I can tell – is the order in which he presented the ideas. The devil. What an innovative job creator he must be! Fancy that: changing the order. Whatever next? New ideas?

Nah. that would be un-Republican of him.

Here’s the serious point: there is nothing, absolutely nothing, in that plan that has not been tried or advocated before. Most of it is the reason we are where we are. The bit about lower taxes is getting ridiculous. It seems that every economic problem the world over can be solved, according to the Republicans, by lowering taxes on the wealthy. You know. Those job creators.

Let me keep this simple.

We are all job creators. Yes everyone single one of us. Every time you go out and spend, you are creating a job, because your spending is someone else’s income. And that income provides the basis for employment. We all create jobs. Not just capitalists. Indeed, given that capitalists are prone to substitute capital for labor, I think it fair to say that capitalists are weaker job creators than the rest of us. And don’t get all productivity-oriented on me: the addition of capital is supposed to make labor more productive and, in theory, support a rising standard of living. Maybe. That has to work its way through wage increases facilitated by that additional productivity. But what if capitalists hog all the gain for themselves, as they have for the past three or four decades? Then there is no job creation and incomes get all skewed. Which is what we have experienced.

We don’t need to fawn over business, we need to make sure it isn’t anti-social. Business is doing just fine thank you. Else it wouldn’t be making record profits – like it has been – would it?

And the canard that health care reform is the reason why health care costs are rising is an old and wrong one. It isn’t. Small businesses are saddled with rising and unbearable health care costs by our current dilapidated and highly inefficient private system. That’s why I advocate reform. ‘Obamcare’ is a halfway house along the road to sorting out our health care mess. It isn’t the right answer, but it’s sure as heck better than the private system Romney wants to resuscitate and inflict on us all. He, like all Republicans, think we all enjoy the pain the big insurance companies inflict on us. All those denied services. All those increasing premium payments. Happy times. Let’s take a quick poll: hands up all those who love their health care insurer? No. I didn’t think so.

The big disappointment, although not a surprise, is that the Republicans have absolutely no plan to deal with our ongoing crisis. Instead they want to stick with the same set of ideas that got us here with the dangerous addition of a severe dose of austerity. This latter would be laughable were it not so sick. This is the self-same party that plunged us into debt for no apparent reason. Only two presidents in US history have significantly increased the US debt without cause. By cause I mean a threat such as war or recession. They were Reagan and the younger Bush. Remember Dick Cheney and his attack on critics of Reagan’s budget busting debt? He told us that “deficits don’t matter”. Now, all of a sudden, the Republicans want us to believe they hate government debt. No they don’t. They hate government spending on social programs. They love government spending on guns. A debt created by buying guns is just dandy for them – ask Reagan. It’s just their fellow Americans they hate. Poor people, the sick, the elderly, and the unemployed. They are the enemies the Republicans like to go after by starving them into submission. Foreign enemies? Well, they can just bomb them.

So we learned nothing, other than that the Republicans haven’t moved forward. And don’t want to either.

Oh. We did learn they lie with impunity.

Ryan keeps on attacking Obama for the closure of a factory that was closed during the Bush regime. Everyone keeps on noting his lie. He keeps on repeating it.

Then there’s Medicare. Both Romney and Ryan attacked Obama for cutting about $700 billion from Medicare. It’s true. He intends to cut the cost of Medicare by that much. Not by cutting services – which is what Romney and Ryan accused him of doing – but by cutting the cost of providing the same services. He wants to make the program more efficient. To present Obama’s goal as an attack on services is simply to lie. Worse: those exact same cost cuts were previously supported and endorsed by Ryan. He flip-flopped in order to fall into line and create an error-based line of attack on Obama. Worse again: the Ryan plan for Medicare – the one that is now official Republican policy – actually does reduce services. It does so through the backdoor of rationing. By foisting the responsibility of health care back onto the shoulders of the elderly, and by limiting the amount they can spend, via fixing the value of the vouchers they will receive, the Ryan plan actively seeks to reduce the services a person can afford. So the Republicans are setting out to do, in fact, what they wrongly vilify Obama for trying to do

The stench of hypocrisy has never been more thick.

Nor has the fog of obfuscation.

Neither Romney nor Ryan offered any specifics about their economic plans. We are supposed to fall into line behind their warm personalities and tough guy experience. And then simply trust them. Their numbers don’t add up, so we are assured they will – eventually. The only thing that is not vague is the unrelenting attack on the very vulnerable whom we are also assured the Republicans will protect. Quite how that protection will work while services and budgets are slashed, and taxes on the wealthy are reduced, we are never told.

The entire Republican platform is a mean spirited, vicious, and class based attack on the weak and the less well off. It is profoundly anti-social, and condemns millions of Americans to a lifetime of poverty and ill-health. But it is wrapped in warm fuzzy all-American mythology and endless references to happy times. That too is not new. That too is a lie.

I am sorry. Electing a president based upon the warmth of personality got us Bush. It brought us Reagan. It brought us both Clinton and Obama. It also brought us a depression.

It’s time to elect someone with a program to fix things. Romney’s plan is no such program. It’s tired. It’s old. It’s been done over and over. And it’s failed.

We need to move on. I don’t know whether Obama can lead us forward. We now know Romney has no plan and no intention of doing so.

No wonder people are confused and apprehensive. We are leaderless.

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More Mixed Messages

Today’s report from Case-Shiller suggests the housing market is recovering. Finally. The latest figures are for June and show a second straight month of price gain. Clearly home prices have hit bottom and are bouncing back at least a bit. That ought to bolster the economy later in the year as households breath a sigh of relief that their major asset is no longer fading but is strengthening. Even if only a little.

The June gain, at 2.3%, was strong enough to push prices into their first year-on-year gain for two years. Even though that annual gain of 0.5% was low, it marks a significant turning point in the market. Better yet: every one of the twenty major cities covered by the survey registered gains with, as we would expect, some of the most depressed showing the most rapid price increases. Detroit, for instance, saw prices rise by 6%, whilst Minneapolis saw a rise of nearly 5%. The good news is that the gains were so widespread. This is the first time for a while that prices rose consistently across the entire nation. Couple this with the results of other surveys – CoreLogic’s data has the year-on-year gain at a more robust 2.5% – and the upbeat tone in new home construction, and it is obvious that real estate, so long a drag on the economy, has found a bottom and is crawling out of the hole.

But let’s not forget how deep that hole was. Even with June’s gain prices are still about 31% below their peaks, and are not likely to recapture those levels for many a year. Nonetheless the depressing factor that home prices exerted on the economy is abating. That’s good news.

Today’s bad news is that consumer confidence continues to ebb. The Conference Board released its latest survey results this morning – its index dropped to 60.6 in August, a nine month low, compared with July’s 65.4. August’s disappointment continues a downward trend of three straight quarters and suggests that households will be less inclined to spend as the year progresses.

The air of negativity and uncertainty stems from the 42 month long spell of unemployment being above 8%, the lack of wage increases, and the endemic political conflicts in Washington.

The latter ought not be ignored. The collapse of compromise and the unrelenting attacks on Obama by the hard right of the Republican party have produced a pervasive feel of hopelessness across the country. The crisis was met not by an air of cooperation in order to fix the nation’s ills, but by a kind of political trench warfare that engulfed everything. Progress cannot be made until the air is cleared and until the extremists are eliminated from the discussion. Unfortunately that cleansing is not yet underway, although the longer term evidence suggests that this election is likely the high point for the right wing: if they don’t win now they will start to face an ever more difficult fight as demographics shift markedly against them. The extremist libertarian agenda, designed as it is to destroy the American post-war social contract and replace it with a viciously anti-social quasi 1850’s vision that undermines recent gains for women and minorities, is self defeating in face of those demographics. After all it is exactly the groups most hated by the current Republicans who will begin to dominate the electorate beginning around 2020. Many of the more savvy right wing strategists are aware of this emerging problem, but their party, having sold its soul to the religious, libertarian, and racist extremists faces a steep and difficult makeover if it is to return to any semblance of centrist politics. The probability of success diminishes daily as some new face emerges on the right to express an ever more extreme or oddball viewpoint. Meanwhile Romney, who, given the economy, ought to be romping away with the election, is hobbled by the grab bag of positions that clutter his party platform. He has failed totally to face down the right which suggests he cannot govern from the center. This implies that a Romney win will simply invert the current impasse with the Democrats this time playing the role of obstruction. An Obama win, in contrast, holds the vague hope that we may break the deadlock. After all were he to win he can claim to have repudiated the Republican platform and to have won the right to continue with whatever they objected to the most.

The longer the obduracy and hatred persists in Washington the longer it will be before the average voter regains confidence in the political process. This, in turn, prolongs the feeling of malaise, disaffection, and uncertainty.

Which is why we keep getting days like today: full of more mixed messages.

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Romney and Health Care

Could he be more stupid?

Not only is Mitt Romney the architect of Obamacare via the system he invented for Massachusetts, and mightily reviled by the right wing for it, but he is also a huge fan of all things Israeli. As you all know it is essential that any candidate for president in the US abandon all objectivity and instead throw themselves fully behind Israel no matter what the consequences. And Romney has gone further than most. He has embraced the Israeli health care system, the results of which he has praised to the rafters.

And indeed the Israeli system is a paragon of low cost efficiency with spending limits set per person, hard negotiation over prices, and great pressure on doctors to provide value for money.

It is also a government run single payer system.

It is the very antithesis of the US system. And is the kind of evil government intrusion into private lives that the modern Republican party so despises.

In other words, in his zeal to endorse all things Israeli as he chases the American Jewish vote, Romney has lauded the anti-christ of health care systems.

It will be fun to watch him walk this back. Has there ever been a more inept candidate? Not even Bush was this dumb.

I never thought I would say that.

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It’s The Wages Stupid

Such is the breadth and depth of the Romneyfication of our economy that otherwise sensible people make silly faux pas or repeat false thinking without a hint of knowledge of their error.

Take Sebastian Mallaby for instance. I was pleased with his two recent articles on banking. He offered us all a strident argument for the break up of the biggest. His logic was impeccable. His conclusions irrefutable. Of course this glowing reference of mine might be due to my prior identical argument. So, he rose in my estimation. Only to trip up.

In his article in today’s Financial Times he goes to great lengths to criticize the Fed’s rather anemic approach at present. Despite the manifest failure of its previous efforts to bring down unemployment, and despite the recent gathering of darker clouds portending a weakening of the economy, the Fed is stuck in a dithering pattern. This is largely because there are one or two strict advocates of depression austerity on the board who manage manfully to scupper progress most of the time. I think, also, that Ben Bernanke, being a stout Republican, is loath to do too much to help Obama.

So Mallaby hits away at this ineptitude. Good so far.

But.

Buried towards the end of his article we find this gem:

“Banks, having sold Treasuries, must choose to reinvest the proceeds in riskier assets rather than just adding to their huge cash piles. Corporations, facing lower borrowing costs, must resolve that this is the moment to invest. Consumers, seeing rising stock and bond markets, must summon the confidence to spend. If the Fed won‰Ûªt take the risk of going beyond what it has tried already, private actors won‰Ûªt take risks either. Monetary policy is like faith healing. The patient must believe.”

So. The path to success and to our final breakout from this lingering depression of ours is to engender confidence. That, apparently will solve everything.

No it won’t.

While I agree that confidence play a large role in shaping economic activity via the formulation of expectations and the encouragement of ‘animal spirits’, I am not sure that they are the critical element at play dragging us all down at present.

Ponder, for instance, on the way in which consumers are supposed to get back on track. According to Mallaby they need to see the stock and bond markets in glowing health. That will, apparently, cause them to cast aside their cares and go out on a shopping spree. Only a true child of the Romney era could ever think this. Us less educated types think that the lack of spending power may be a tad more important. And for the large majority of non-Romney people spending power flows from wages not stock or bond appreciation. It is the lack of wage growth for decades now that has caused the seizure of our economic motor, not the failure of stock prices to continue into orbit.

Now, I will grant that the middle class is too obsessed over house prices and that the crash in such prices has a lot to do with the enervation of our willingness to spend. But the reason we are so obsessed is precisely because homes are the largest assets most families own. Not stocks. Where the average family owns stock it is usually tied up in some form of retirement account and is managed by someone else. So whilst the financial media reports every little blip in stock prices, and I am sure many people take notice of them, when pinch comes to shove and a decision to buy something looming, it is cash in the bank that counts more than anything. And, as I have pointed out, that cash is most likely derived from wages.

This is, I am afraid, where the entire Romney generation gets off track. So enthralled are they by shareholder value, rational expectations, efficient markets, and market magic in general, that they entirely miss the point. They have done well. They do, in fact, have stock portfolios. They are concerned over stock prices. They worry about the things that Romney worries about. They have similar educations and world outlooks. They represent the failures of the Reagan/Bush delusion that free markets fix everything. And that for free markets to get on with this fixing of everything all we need is to inject a burst of confidence.

Rubbish.

Cash helps too. In fact it dominates all else.

During the last three or four decades our economy has shifted its weight behind profit and away from wages. It has been Romneyfied. Business firms have defended profit at all costs. They have Romneyfied the economy by gutting, deconstructing, outsourcing, offshoring, breaking contracts,and generally trampling on the workers who, in their role as consumers, those very firms rely upon for sales. It is no surprise therefore for the game to come to an end someday. When workers as consumers have no more cash, or when they have to reduce debt from flat wages, they spend less. Demand falls. Or its growth is meager. All the confidence in the world will not generate a spurt in spending if people have nothing extra to spend.

So it would be nice for confidence to grow. But it would be nicer were wages to grow first. But that means profits would have to fall relatively. And that doesn’t fit the Romneyfied narrative. So we don’t hear people like Mallaby talk about it.

Shame. Those banking articles were quite good.

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