Obama

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Test Bed For Gridlock?

We all complain about the gridlock in Washington. Nothing, it seems, can get done. Everyone becomes more and more cynical and disenchanted with government. Our belief and faith in our key democratic institutions plummets. And so on. That’s the story repeated relentlessly in the media.

So wouldn’t it be nice if we could examine a microcosm of that gridlock, tease it apart, and expose its inner workings to see what the problem is. We would then have a small laboratory version of the whole to poke and prod under our microscope.

Well, guess what? We have just such a sliver. It’s called the Republican Senate Caucus. Let’s get cracking and take a look.

First, let’s establish the problem we are trying to solve.

Gridlock is our government’s inability to govern. Or, more precisely, to put into law the things that we out here in the hinterland of voter-dom want to see done. Yes, I know that the notion of voter homogeneity is ridiculous. The country is deeply divided on what ought to get done, so, to some extent, the lack of anything actually being done is welcome. It stops one side or the other from getting a raw deal. Gridlock is akin to trench warfare. There’s an awful lot of smoke and fury at election time, after which not much legislative territory has changed hands. Instead we all sit back exhausted and plan, however reluctantly, for the next major battle.

This time is different. Why? Because the Republicans own the entire legislative process from beginning to end. They can, in theory, do whatever they want. Indeed, last November they were jumping for joy at the prospect of unified government. They were energized, enthused, positively giddy, and triumphant. Now, they shouted to all and sundry, is our chance to enact a truly conservative set of policies.

Their first and most iconic target?

Obamacare.

Well here we are mired once more in gridlock. The trenches are filled with exhausted foot soldiers. The casualties are mounting. There are distinct rumblings of discontent in the ranks. The generals are being called buffoons. Their leadership is being visibly called into question. Failure upon failure is sapping morale. Worst of all: not a single yard of territory has been gained. Obamacare is still the law of the land. Its citadel is still untouched. Seven long years of promise produced nothing. Six long months of legislative siege have produced even less.

And this gridlock is the product entirely — exclusively — of the internal arguments within the Republican party.

This has nothing to to do Democrats.

It has nothing to do with our convoluted constitutionally belabored legislative process.

It has nothing to do with anything other than the party in power.

Which is a party that cannot muster its fifty-two Senators to stand together on what has been the most important issue ever according to its leadership.

Actually it didn’t even need fifty-two. It could have managed with just fifty and used the Vice-President’s vote as the decider.

So here we are in national legislative gridlock, not because of partisan bickering, not because of cultural or economic divisions on the country, and not because of the novelty of the issue at hand. No. We are in gridlock because fifty-two people cannot agree amongst themselves on a topic they all keep telling us is something they really want to deal with.

Never again should the media refer to partisan gridlock. Those days are over. We have exposed, in our little microcosm experiment, where the nation’s problems lie.

The Republican party has always been a coalition of disparate parts. Its unity has been paper thin for a long time now. The constant drumbeat of “tax cuts for the wealthy” has been the cement that held the rickety structure together. The cultural issue-driven conservatives, the libertarians, the corporate apologists, and even the few remaining old time moderates could all rally behind tax cuts.

What they could not rally behind was slashing healthcare for millions of people in order to deliver yet one more tax cut for the rich.

It was a tax cut too far.

All that time yelling and screaming about Obamacare was a hollow sham. None of the Republican leaders seem to have spent any time working their caucus to build an alternative. This is astonishing. Did they really think “repeal” was viable? Did Ryan or McConnell ever stop to think through what a healthcare bill has to have in it? Why were they not planning carefully for their attack? Did they think they would never be in charge? Are they that defeatist?

They became a party with no substance to back up its rhetoric. They became a party of permanent opposition and thus untethered from having to have alternative policies at the ready. Both Ryan and McConnell readied themselves to be, and prospered in being, naysayers. They never prepared to govern.

Their caucus took their lead. Heaping ridicule on Obama took the place of policy argument. Outright opposition took the stead of thoughtful critique. The radical right wandered even further right in an unmoored exploration of idealist fantasy, solving every world problem by exclaiming the virtues of free markets apparently oblivious to what the workings of a free market might be. The so-called House Freedom Caucus rose to great power because Ryan never reined it in — he’s a closet member anyway — and never thought to water down its ideological extremities as preparation for power.

In the Senate, once McConnell declared war on Obama within minutes of the latter’s victory in 2008, the scene was set for sterile parliamentary maneuvering as a replacement for thought. McConnell is regarded as a master of Senate rules and practice. He is clearly in the shallow end of policy making. He needs to stay in the shallow end. He nearly drowned when he set out to swim in the deep end to draft an alternative to Obamacare.

This exposure of the manifest divisions within the Republican party — recall that we are talking about a mere fifty-two people — gives us a clear source of our national malaise. Gridlock in Washington exists because our two party system is actually many more parties kluged together in an anachronism. They need to be set free.

In times of great change such as ours, when both society at large, and the economy specifically, are undergoing massive re-drawing of institutions, are shaking off tried and true traditions whilst trying on new replacements; while the influence of money and corporate lobbying stifle the expression of voter sentiment and allow the surge of enormous privilege to a very small part of society. And while demographic shifts alter the very nature of the electorate that seeks representation in  Congress, it is not surprising that our old two party alignment no longer fit the political landscape.

We need new political parties.

We just saw why. One of our old ones cannot solve a problem it regarded as iconic. Gridlock reins, not between our political parties, but within them. Yes this is a moment of great partisan division and conflict, but the strife is internal to the parties. The external conflict between them pales into weak skirmishing by comparison.

In short: the Republicans gridlocked themselves.

Now what?

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Healthcare – A Senate Nightmare?

Well, the Congressional Budget Office has spoken. It issued its report on the House healthcare plan that passed a few weeks ago. The picture it paints isn’t pretty, and it creates a nightmare for the Senate.

First, let’s all remember that the Senate was going to construct its own healthcare reform plan. This is the American way. Everyone involved gets to write a plan, and then they all sit around and ‘reconcile’ their differences in order to end up with one that can then be voted and signed into law by all involved.

In this case the House passed its plan without waiting for the CBO ‘score’ to arrive, and before many legislators had time to read and absorb its impact. The reason for this was obvious: Paul Ryan needed to create the illusion of progress, waiting for the CBO would have risked losing the support of the more moderate wing of his party and thus failing, for a second time, to carry through on an eight year Republican pledge. It was highly unusual to go to a vote before hearing from the CBO on such a large and complex subject, but the political risks necessitated haste.

The problem is, of course, that all Ryan accomplished was to punt the big issues and dump them into the Senate’s lap.

Here are the key points that will bog the Senate down:

  1. The CBO lambastes the fix put in place to deal with pre-existing conditions. This was the very ‘fix’ that Ryan used to woo the moderates in the House. Had the CBO report been available before the House vote it is clear those moderates would have voted against. So Ryan was right to rush. The Senate, however, does not have that luxury. It will have to plug the hole the CBO has identified — there are Republican moderates in the Senate who have said they cannot support reform unless the ‘fix’ is fixed! This, naturally, then raises the ;prospect that a Senate plan which includes a patch for the pre-existing condition hole in the House plan would fail to get right wing support in the House when they vote on it after reconciliation. At which point Ryan’s entire project is revealed to be a flop.
  2. The original Ryan plan that failed to get out of the House was scored by the CBO as cutting off coverage for 24 million people. All the patchwork on the second plan has reduced that only to 23 million. The Senate is now on the hook: does it really want to eliminate healthcare coverage for that many voters?
  3. The House plan includes a massive $800+ billion reduction in Medicaid, which is the program through which poor people access healthcare. The reason for this is to pay for the elimination of the Obamacare tax on wealthy people. The Senate is thus facing the political conundrum of clearly taking away healthcare for the poor in order to cut taxes for the rich. That’s poor optics under any circumstance. It is particularly poor in view of the contentious elections in 2018. This is complicated further by the fact that some states with Republican Senators took up the expansion of Medicaid under Obamacare — anyone receiving care under the expansion would lose it. This is hardly a vote winner.
  4. The House plan hammers the elderly and the poor. The CBO estimate is that a typical elderly person could face an increase in premium costs of 800%. The Senate will want to avoid the ire of older voters. That has to be fixed.
  5. Lastly: although premiums might well come down for healthy people two countervailing problems are noted by the CBO. One is that the lower cost plans will be ‘barebones’ and may not be adequate, which was a recurring problem that Obamacare tried to fix; second, lower premiums are not assured across the entire country. Because of local market conditions some parts of the country may well see premium increases despite the House plan. Since these areas are largely rural and Republican supporting, the political risk is very high.

So the Senate is not in a happy place. That’s putting it mildly. Such is the division within the Republican ranks over some of these key issues that Mitch McConnell, the Republican leader, was already doubtful of getting sufficient votes to pass reform under any circumstance. The CBO just made his task more difficult.

So it could be that Obamacare survives, and that the Republicans move on defeated on one of their cast iron pledges.

Tax reform is no easy task either. So the question is emerging: can the republicans actually govern? Or was all that anti-Obama rhetoric just vapor?

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Economy Base Level

We are, no doubt, about to be barraged by a torrent of alternative facts concerning the economy and economic growth under our new leader. So let’s get a few facts on the table in order to set a base level for future reference. Let’s start with growth during the past six presidencies:

So, no, Obama was not the disaster Trump and the Republicans are trying to paint him as. The economy during Obama’s term outperformed that of his predecessor. This includes the enormous difficulty of digging out of the Great Recession without much help from Congress.

Average growth through all that last six presidencies is around 2.8% a year, so boosting it to, and then maintaining it at, the 4.0% promised by Trump will take some extraordinary efforts, not to mention a defiance of history and is thus unlikely to occur.

More likely Trump will benefit from the current relatively good pace of growth, and then be able to add a little to it by introducing some deficit spending related to infrastructure. We must, though, be cautious about making that forecast: as of now we have no idea what team Trump has in store for us. We do know that the Republicans have, since Reagan, opposed infrastructure spending financed by increasing the Federal deficit. They had no problem blowing a hole in the Federal budget under Reagan — we all recall Dick Cheney telling us that, in his words:  “deficits don’t matter” — but since the rise of the Tea Party the GOP has been dominated by a austerity hawk policy bias that has stymied any attempt to boost growth using government spending.

Given this, I imagine growth will accelerate this year — the economy has healed well even if the distribution of all this newfound prosperity is appallingly distributed — so look for GDP growth of about 3%. Next year it could be higher if Trump gets some sort of deficit spending through Congress. But after that I doubt this higher pace could be maintained, and I would expect GDOP to slide back towards the slower pattern of recent years.

I am only mentioning any of this so we can be clear about the facts and the base from which we are about to start. Presidents have remarkably little direct impact on the course of the economy so I am leery of associating growth with presidencies in principle. The policies of earlier presidents have a nasty habit of echoing in unexpected ways through time. Reagan, for instance, is responsible for the rapid uptake of the anti-social policy making that was carried on by Clinton. And the awful switch in corporate activity towards the pre-eminence of shareholder value as a key metric of management success was clearly a product of the neoliberal shift Reagan’s election heralded. He did not advocate such corporate behavior, but he undoubtedly set the stage for it. And history has shown that his administration marks the beginning of the slide in standards for the middle class and especially for workers in the lower income strata. Reagan himself, in terms of policies, may not have been responsible for that slide, but there is no doubt his ideological leadership was.

The question for us is, then, does Trump’s election mark the beginning of a new era and the rejection of the past forty years? Or is it simply an interlude dominated by a series of futile and short lived injections of energy that will rapidly dissipate and leave the economy basically unchanged? Will he tackle inequality? I doubt it. Will he introduce institutional changes to deal with the asymmetries of risk piled upon the shoulders of workers by the corporate led changes in the nature of work? Maybe, but that assumes he understands those changes. The evidence for that is thin: he looks very much like an old fashioned pro-business trickle down plutocrat. So don’t expect much other than  lot of hoopla, fanfare, and then not much else.

Let’s hope I am wrong, our workers need all the help they can get, but there’s no sign of Trump being their savior. His administration is packed with other plutocrats whose basic understanding of the how we arrived where we are is, to put it politely, next to zero. The next few years are more likely to be a cloud of dust than a step forward. And the bigger risks — such as mismanagement — are on the downside not the upside.

Caveat emptor.

 

 

 

 

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The SEC rules on CEO Pay – Sort Of

I have a friend who counts bank reform as one of Obama’s signature achievements. Maybe. But what he probably doesn’t realize is that it is only just now getting implemented.

Hidden amongst the weeds of the Dodd-Frank legislation was a provision authorizing the Securities and Exchange Commission to order publicly traded companies to publish the ratio of CEO to median worker pay.

That rule was finally voted on this week. That is five years after the legislation was passed.

The delay in enforcing the rule was caused, at least in part, by the massive push back by big companies. Presumably they were embarrassed by the ludicrous differential that has opened up in that ratio.

One of the major reasons business gave for objecting to the rule was that it is very difficult to calculate how much they pay their employees. Really? It doesn’t seem that way when they announce cost cutting programs aimed at boosting earnings per share. Somehow I think businesses have a pretty good idea of their payrolls. After all they are notorious for being picayune over every little detail that might cost the CEO a part of his or her bonus.

They also argued that compliance with the rule would cost them about $1.7 billion a year. Imagine that. Running a fairly routine calculation based on one of the most frequently run databases they have costs that much. I don’t think so.

Either that or I think the SEC ought to worry about the ability of these businesses to report their earnings accurately.

Big business seems to lie about the cost of compliance every time it is asked to provide basic information to the public. There is no reason to imagine that it wasn’t lying this time too.

Predictably the vote at the SEC was along party lines. The Republicans are very jealous of their image as protectors of big business. Furthermore throughout these past five years business has managed to install a number of amendments to the rule that will make the ratio appear less outrageous than the original rule would have: they can exclude foreign workers, they can choose the ‘sample’ of employees upon which the calculation is made, they can exclude a percentage of part-time workers, and so on.

Nonetheless getting the rule enforced is a step, albeit a small one, in the right direction.

One last thought: if its that hard to calculate a median of worker compensation, I wonder how difficult it must be to calculate the marginal cost of labor that economic theory argues is the basis upon which firms decide their employment requirements. Surely marginal theory isn’t just a figment of the minds of a few conservative economists is it?

On the other hand, having struggled many years ago through a maze of cost accounting at a variety of big businesses I can vouch for the irrelevance of marginal theory without having to worry about the calculation difficulties businesses face when asked about their payrolls.

Realism is not one of the major attributes of business when faced with calculating the cost of regulation. Nor is it a key aspect of economic theory.

Realism? That would spoil the fun. Wouldn’t it?

 

Addendum:

For those counting, this rule enforcement is a major setback for SEC Chair Mary Jo White who is renowned for caving to those whom she is tasked to oversee. She famously refused to order companies to publish their political donations. Apparently political transparency is bad for business. And Mary Jo is all about being pro-business.

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Jeb? Not Jeb!

Oh no!

With the big boys and girl now officially in the presidential race we are all going to suffer from political pablum for the next year or so. So far the signs are not good.

I find the Jeb Bush effort the most depressing so far. And that’s after only a day or so. His primary claim to fame rests on his days as governor of Florida. His campaign is gushing with all sorts of supply side promises. Jeb [his last name has discreetly disappeared] stands, we are told, for free enterprise. Free at last from the stranglehold of Obama’s quasi-socialist grip. At least that’s what I surmise.

Just this week I ran into someone here in Vermont who was positively apoplectic about our government’s policies since the crisis. Those policies had, I was told, stifled growth, cost us millions of jobs, and generally loused up the business environment.

Now, I happen to agree.

Our government has done a very bad job of getting the economy rolling. But I doubt that my interlocutor and I would agree where to place the blame. He would, I assure you, blame Obama. After all it is ‘well known’ by those who take themselves really seriously on these matters that he has poisoned the business environment. And American business is, presumably, easily frightened. So much so that even though profits have reached all time heights, and wages have been crushed by the onslaught of manic cost cutting in order to preserve those profits, CEO’s fall over themselves to criticize the administration.

What for?

Now that’s a little opaque. It seems to be a general malady rather than anything specific. Obama sometimes says nasty things about business and that makes CEO’s feel sad and unwanted. These are the self-same tough minded folk who take all those tough decisions to cut jobs even though it pains them to. They’re tough. They got to the top by being tough. Did I mention they’re tough? Yet they melt like butter when Obama says something critical. Poor dears.

I have a somewhat different perspective. I happen to think the administration was weak when we most needed strength. That was back in 2009, when we needed a whole lot more deficit spending to boost demand and to crank the economy out of its near depression. The administration misunderstood – that’s the most benign excuse I can come up with – what the crisis really was. Its efforts were too little. And when the penny finally dropped the Republicans had won the 2010  elections and were firmly in control of the discussion.

So we slipped into terrible economic management. Our focus shifted towards deficit reduction and the so-called terrible consequences of expansionary monetary and fiscal policies. By falling foul to this false message we hobbled ourselves.

And therein lies the cause of our malaise: Republican advocated austerity at a time when we needed expansion. Fortunately it didn’t sink us, but it certainly slowed us.

Back to Jeb: his record in Florida was based entirely on his oversight of a massive real estate bubble. It was utter fiction. We know that because once the bubble burst Florida shed jobs at an alarming rate. Jeb managed to leave office just before the bottom fell out, so his record belies his impact. That seems to be a family trait.

In any case I have a suggestion for the Bush campaign: his logo is currently Jeb! With the exclamation mark both substituting for his infamous last name and indicating a presumed excitement. I think this is inappropriate. It ought not be Jeb! but Jeb?

As in ‘really?’

Supply side? Again?

How many times does this debunked idea have to float to the top of our political debate before we finally sink it for good?

Jeb?

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