Is the elephant irrelevant?
It was not really the fact of, but rather the manner of, President Barack Obama’s re-election that was a mortal blow.
The Republican Party as we have come to know it in the last few decades is in political bankruptcy.
In a Democracy, the currency that governments spend is the will of the people. Last night, as the election results poured in, it appeared clear that the Republican Party is running out of currency. The demographic of the American voter has shifted, just as the parties sensibility of inclusiveness has contracted. Social policies ranging from abortion to immigration did much of the damage. While the Romney campaign tried to make the entire election dialog about the economy, voters clearly had something on their minds.
For example, exit polls in Ohio, which the Republican electoral strategy absolutely required, showed an almost 2 to 1 ratio of voters saying that the economy was the most important issue, and that Romney would probably be better at handling the economy. This was very clear in exit polling. Yet Romney lost.
Now let me be clear. The Republican Party will be fine. Political parties are no more ‘people’ than corporations are. They do not die, as I suggested in the title tongue in cheek. But they do need to occasionally deconstruct themselves so that they can rebuild from the ground up. That is where the Republican party finds itself right now.
I believe that the Republican Party is worth working to resurrect. Their fundamental message of fiscal conservancy is an important thing for our political culture. But it is not going to be easy, and it is not going to be fast.
The massive generation Y voter base, a rising Latino population (10% of the electorate for the first time), rising urban voting percentages, the now significant gender gap in voting… all of these things have coalesced not once, not twice, but three times for the Democratic presidential candidate. There is good evidence that their voting patterns, while not hard coded, are now predictable. This adds up to a demographic, electoral problem that will be the topic of conversation for years to come.
In 2008 when John McCain lost, many described the inward turbulence in the Republican party as ‘a knife fight.’ In 2012, no one is bringing a knife to this fight. This is a very bad thing for America, as we desperately need both of our political parties to have a clear sense of their parties vision, and their top priorities. We need these so that we can find ground to compromise and move forward.
Our nation is almost evenly divided. Sure, Obama won the popular vote by a convincing margin. It was hardly a significant margin. Sure, all the logic above seems to indicate that this gap will increase in 2016 without a drastic change. But the margin will still not allow the Democrats to truly wield the power of the legislature. This is the way our government was designed; it sacrifices decisiveness to enforce a move to the center, to compromise.
Over the last 4 years we have seen our ability to actually execute a vision, any vision, shrink immensely. Without compromise, the Republican parties fate could become the nations as well.
Mitt Romney clearly appeared more zealous, and perhaps better prepared for this first presidential debate this evening.
The question on many Republicans mind is what will this mean for his polling, particularly in swing states? Will this translate into greater enthusiasm in his base? Will his performance influence the few remaining undecided voters?
The biggest question that Democrats are asking is what was holding President Obama back? He seemed listless and almost disinterested. One would have to presume that he went into this debate with the stern advice of his team to simply avoid a debacle, rather than go for the throat. Romney was going for the throat, clearly, and so many folks are asking themselves where this moment was (see inset photo).
To my eyes there were a lot of loosely strewn facts on both sides, but Governor Romney seemed to be the most liberal with the truth. In particular, his claim that he (that’s ‘we,’ as he corrected himself) will create 12 million jobs, if elected. Moodys estimates that America will create 12 million jobs by 2016 regardless of who is elected. His claim that he would have to get another tax adviser, as he was unaware of a tax credit for shipping jobs overseas, when of course any business can deduct the costs of closing down an American based business as they port the operation overseas.
Dodd-Frank is not damaging local banks, least according to politifact, an assertion which Romney repeatedly stressed. And of course the Palin-esque reference to a panel of appointed advisers (death boards as Palin put it) is patently false. Massachusetts, to my knowledge, was already leading the nation in education when he took office, yet he twice took credit for that fac. His most accurate, telling point was that gasoline prices have doubled… that tends to happen when you destabilize the entire Middle East with a few wars. It is also a very good reason to invest in clean American green based energy solutions.
Yet despite all of that, he hammered on Obama and painted him into a corner on his record, which the Obama team has explicitly stated that they do not want this election to be about; a choice election. It puts Obama in an untenable position of blaming the country’s lot on factors that he inherited (despite how true that may be, it only carries weight for so long).
Obamas worst factual gaffe was his reference that the fundamentals of Medicaids economics are strong (almost a Lehman moment there, at least if we were in 2020). The fact is that it is on a slow trajectory towards insolvency, and that will need to be addressed in coming years.
There was a strategy at work in the soft-spoken, almost meek tone that Obama struck tonight… Perhaps if they move the next debate outside and a driving rain begins to fall, we will see the fiery orator that we have seen in the past? Romney wins this round; it will be very interesting to see what effect that has on the polls, and ultimately on voter turnout and sentiment.
I spend my days developing technology solutions. That leaves precious little time for my passions in the evening – my family, friends, politics, and of course, more technology.
But I am constantly amazed to the extent to which lessons that I learn during my daytime activities translate into my understanding of the larger world. For example, one of my mantras in product development is that ‘all design is an exercise in the lowest common denominator.’ That basically means that when you build a widget or a gizmo, your product specification has to anticipate the lowest common denominator. This can evidence itself in many ways. Perhaps a more practical example is in order – if you are cutting your own hair, and you mistakenly cut down to the scalp, there is a pretty good chance you are going to end up shaving your head!
As we slouch our way towards the nomination of a GOP candidate for the 2012 election, I am seeing a wealth of examples of the lowest common denominator rule. In politics, it often translates as ‘you will never go broke pandering to the lowest common denominator.’ On a side note, I have lost the etymological source of that phrase – if you know please drop me a line!
Politics in America is no longer about debating ideas. It is no longer an effort to find solutions. Politics is about getting elected, period. And to get elected, you have to find what makes people angry, and channel that anger.
Politics is the art of convincing a slave that their chains are jewelry
Sure, the best among our political class (and make no mistake, it has become a class) try to convince themselves that the election is a means to an end. They tell themselves that they have to appeal to a broad swath of the electorate in order to attain office, and then they will change the tenor of the debate.
And then of course when they are in office, they quickly realize that the intractable bureaucracy cannot be changed quickly.
So they promise themselves that in their second term they will finally start to reshape the landscape. By the time they win a second term, if they win a second term, of course they are hopelessly beholden to special interests and frustrated beyond recognition by the way the little things, the stupid things, get in the way of actually governing.
In short, the ballot box has become pandoras box. To get it open, politicians are incited to say things that can only be described as inane but provocative. ‘9-9-9’ leaps to mind. A tax code that had no hopes of working in the real world, but catches the nations attention because of its simplicity. But hey, the simple word ‘change’ worked just 4 years ago.
We need bigger ideas that this. And we need specifics. Without them… well, we as a nation are already far down the path charted in Paul F. Kennedy’s “Rise and Fall of the Great Powers.”
America, for a time, was the melting pot of the world not just for immigrants, but for ideas. There is no god given right for this concept of American Exceptionalism. It was simply good timing and good fortune (which are basically the same thing viewed from different directions). Please do not misinterpret me. America has played an immense role in the definition of the modern concept of freedom. But it did so because of an abundance of a different sort of freedom, the freedom to define a nation without existing entanglements on so many levels.
Consider this. Who was it that coined the term “American Exceptionalism?” You might be surprised to learn that it was Joseph Stalin. He did so by way of deriding the concept, pointing out that never in the written history of humanity has one nation had such a wealth of windfalls as had America.
Today, in 2012, we can look around and clearly see that there is nothing exceptional about America. Its resources have been staked out, its bureaucracy has burgeoned beyond belief. It’s promise of opportunity has become a dream as a landed class of wealthy individuals and corporations fight to win the game and then say no one else can play. In short, we are all grown up now, and have all the inherent challenges to ‘Change’ as any other nation. You need to look no further than immigration – once the lifeblood of a nation melting together the best, and worst, that every nation had to offer; now a curse word designed to insulate and protect my cheese. Please don’t move my cheese.
And so we come to Algernon, that loveable, tragic mouse. America is in a race to the bottom, driven by people whose sole desire is to keep our eyes on the cheese. We cannot raise the level of our debate, because we have become increasingly content, reactionary, and, well, stupid. There, I said it. Think I am wrong? Ask ten people who Kim Kardashian is – then ask the same ten people who Kim Jong Il is. Try it, I dare you.
Our economy keeps trying to pull itself away from a double dip recession. Scores of cities across the nation are struggling to deal with the Occupy movement. Our nation is trying to extricate itself from two costly foreign wars. Political discourse has reached an all time low, and polarization an all time high. The only icing this layered cake needs is an election year.
That is an awful lot to take on in the first post on this blog, so I thought we could start with the Occupy Wall Street movement.
What is the source of this rage?
I have seen and heard people that I respect, people of intellect and moral character, condemn the Occupy movement as nothing more than a mob. I want to take a moment to point out that I am neutral on the subject. I can understand the sentiment that labels the movement as counterproductive, fragmented, even misguided. On the other hand, I think I can understand the rage that the movement is tapping in to.
One of the mystifying things about Occupy is of course that it has no leader and no set agenda. The last time that the US experienced this sort of protracted, coordinated (though that may be overstating it) movement was of course the anti war movement of the 1960s and early ’70s. There were many ways that the message was articulated 50 years ago, but they all pretty much revolved around ‘end the war.’ There was little ambiguity about the single thing that every protester most wanted; cease hostilities and get out.
With Occupy, if you asked 100 people, you just might get 100 different answers. The nice thing about this, from a journalistic perspective, is that we can infer what their agenda is. And so I shall infer away.
How small will the top of the pyramid get?
To me, the thing that I hear and feel, and the element of this anger that I can tap into, has to do with the diminishing lack of economic opportunity in America. Simply put, the American Dream that we have woven into the past three generations appears dead, or at least on life support.
Fewer and fewer people believe that if they work hard they will have an opportunity to advance. Fewer and fewer people believe that they can achieve a degree of security for themselves and their families, formerly referred to as the middle class. Bizarrely, there actually seem to be more people who cling to the notion that they can become not just better off, but wildly better off. Perhaps that is a byproduct of the despair that leads to the rage.
Again, I am not endorsing or condoning these feelings. A large part of me says we all need to be more personally responsible, and less concerned with others. But I can certainly understand the feelings that are referenced above.
The economic tension in this country is so palpable you could cut it with a knife.
But where is this coming from? Is their data to support that despair?
I don’t feel that any data is necessary to support the fact that the average American is currently under severe economic distress. The economic tension in this country is so palpable you could cut it with a knife.
Where the data gets interesting, and perhaps instructive, is in the distribution of wealth over the last 25 years. Starting in 1986, we have seen a dramatic growth in the income of the top few percent of Americans. A staggering percentage of the wealth in our country is now controlled by a diminishing minority, and that is reflected and fueled by their ability to earn a vastly disproportionate amount of income.
As the graph shows, the top .1%, or roughly 300,000 individuals, were earning 8% of the total income in the US in the last year charted (2008). In 25 years, that percentage quadrupled from ~2%.
Now let’s visualize the top 1%, or roughly 3 million Americans. We can see a nearly identical growth curve… though despite the sample being 10 times larger (from the top .1% increased to the top 1%), the total income percentage earned only doubled, to ~18%. So the top 1% of Americans earn 18% of its total annual income, but we can already feel the diminishing effect.
Next let us look at the top 5% of wage earners, and how much of the nations income they earn. If you have to look twice, that is ok. The charts are freakishly similar in their trajectories, just not in their values. As the saying goes, a rising tide raises all ships – the question that is never posed of this truism is of course, does it raise them all enough to float on their own?
FYI, in 2008, these folks were earning just under 250k per year, not including capital gains. You can see the growth in monetary terms for this top 10% here. (Graphs generated from “The World Top Income Database” at ParisSchoolofEconomics.us).
What can be gleaned from all of this? Well, interpretation is always dangerous, but when I look at the charts, I think these truths are self evident:
- This is not new, as all of the graphs show, we saw this same gravitational pull of liquidity before the great depression. In 1913 there is a precipitous drop in the percent of total wealth earned by the the uber wealthy, the .1%, and another in ~1940. This corresponds of course to a growth in income for the remainder of America, which created a new broader based prosperity that was dubbed the middle class.
- 1986 marked a watershed year in which income started to again flow in a dramatically disproportionate fashion to a very small base of Americans.
So what happened during the 80’s and 90’s to drive so much of the nations wealth to the existing wealthy? Tax reform enacted under Reagan in 1981 and 1986 had a lot to do with it. Taxes on the wealthy were slashed by almost 300% (this is not a criticism of Reagan era policies in the least – reagan also did a great deal of base broadening by closing numerous tax loopholes).
Of course the increase also corresponds with rising prosperity in America as we shook off the malaise of the 1970’s (yes, there may be a causality here; this article is not meant to judge the reasons why or the overall impact, only to chart the flow of wealth).
Then in the 90’s two immensely impactful pieces of deregulation were cemented as the icing on the cake (again, not a criticism of Clinton era policies). In a nutshell, restrictions put in place on financial institutions during and after the great depression were lifted or reinterpreted. You could easily argue that this ensured that ‘too big to fail’ would come to pass.
1994, Riegle-Neal Interstate Banking and Branching Efficiency Act – This bill eliminated previous restrictions on interstate banking and branching. It passed with broad bipartisan support.
1996, Fed Reinterprets Glass-Steagall – Federal Reserve reinterprets the Glass-Steagall Act several times, eventually allowing bank holding companies to earn up to 25 percent of their revenues in investment banking (source OpenTheGovernment.org)
Finally, the ‘commoditization’ of all manner of speculation became all the rage. Not a lot of people are aware of where and when this began – a fascinating read that is outside the scope of this article. Suffice it to say that the Exxon-Valdez disaster spurred Goldman Sachs to invent a new way to parcel and package liability and debt (insert word ‘toxic’ later) as a broker-able commodity (see an exceptional article on this topic here):
What got the J. P. Morgan team rolling was this thought: instead of swapping bonds or currency or interest rates, why not swap the risk of default? In effect, it could sell the risk that a borrower won’t be able to pay back his debt (source New Yorker article by John Lanchester)
So no real news here. The rich get richer, the poor get poorer. It is so well understood, it is a saying. But what if it is not a cycle, but a progression? Lets think about that for a moment. If the current rate of wealth accumulation continues, how long will it take for all of the wealth to trickle to the top 10%? The top 1%? .1%? Or just the top 1 – one person controlling all of the worlds wealth?
Of course it is impossible for that to happen in reality. The nature of wealth dictates that it cannot exist in a vacuum. There is a limit to how far the polarization of wealth can go before it is reined in. But I ask you, what does that penultimate phase look like? Is it market factors that will reverse that flow naturally? Or is it outrage by everyday citizens who are tired of feeling that they cannot get a break, while they in turn work themselves to the bone only to see breaks given to the existing wealthy? To corporations deemed too big to fail (and made too big by legislative favoritism)?
I took the time to extend the charts shown above in the hypothetical. Of course there are numerous (unsupportable) assumptions made in doing so, but it is instructive to see graphed this way. What I found was that if the current trajectory continues, that by 2040 the top .1% will command over 15% of the nations income. Add capital gains and that number exceeds 20%. Two dollars out of every ten ‘earned’ would go to only 1 in 1000 ‘workers.’
If we make the same assumptions and extend the current trajectory for the top 10%, the numbers are staggering. Fully 70% of every dollar earned in America would go to the top 10% of wage earners by the year 2040.
Capitalism is not meant to create equality. Disparity is the natural result of a capitalist system, and in a just system, that disparity should be celebrated, as it is presumably the result of excellence. But when a system seems to inherently favor the existing wealthy, when taxpayer dollars fund the failures of those that take inordinate risks, it is hardly surprising that the working class should feel the rage that has manifested in the OWS movement.
Consider – between 2008 and 2010, large financial institutions made a net profit of 13 billion dollars solely on the essentially free money they received due to their too big to fail status (Source Bloomberg). Clearly, the deregulation of the financial industries have allowed for, even encouraged, a very unfortunate tilting of the playing field. Can I understand the rage directed at this system? Absolutely. Can’t you?
The first man who, having enclosed a piece of ground, bethought himself of saying This is mine, and found people simple enough to believe him, was the real founder of civil society. From how many crimes, wars and murders, from how many horrors and misfortunes might not anyone have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows, “Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody.” ~Jean Jacques Rousseau, A Discourse on the Origin of Inequality