No More Filibuster?

There are some very legitimate questions being asking right now, but the one that has me stunned is, how has the Senate managed to get so much done after an election cycle where the party in power received a shellacking? I guess we forgot that mache eventually dries.

First, there was the infamous tax cuts. When President Obama made a deal with the Republicans three things were said 1) Obama gave up again 2) Obama won the political battle and 3) the tax cuts amounted to another stimulus. The first argument was made by the left who were upset that the people who earned the most will have their taxes further reduced. That money could have been used to subsidize the cost from the Social Security cut that was also made in the deal.

Pundits believe Obama won the political battle because he appeased the middle. The tax cuts were not a left, or right issue. Opinion polls repeatedly showed that the vast majority of people wanted to see the cuts go through, and because it was an issue the White House pushed, Obama won.

Now, everyone knows what I think about the stimulus argument. The short answer is that they will help, for the short term (but barely), but a lot more could have been done.

What made the extensions even more surprising was that it didn't look like they would pass. The White House did not want to extend those cuts for the rich. But the Republicans insisted on it, and would not have voted for the bill otherwise. The area that put the victory in Obama's corner though was the deficit. After all the talk about reigning in government spending and the wind at their backs, the GOP did not insist on one policy that would reduce the deficit, in fact, they only insisted on increasing it.

More importantly, Obama owned the issue. Maybe it was because he gave Bill Clinton the mic. But in the past Obama has always been trying to explain and level with people on why he made his decision. This time, he blamed the Republicans of holding the middle class hostage in favor of the rich. All the democrats were saying this, every time, they went on television. And it worked.

I wasn't going to say anything, and you have to promise not to tell anyone, but another victory also came when the Don't Ask Don't Tell law was repealed. Those who have been pushing for the repeal were wondering what happened to the guy who said he would repeal the law. After all the challenges in the courts, those hard core Obama supporters were wondering why they had to do so much more work after the 2008 election. For the people on the left that were upset about the tax deal, this may have made up for it. Two years from now Obama can go straight to his base and say he got this done. Unlike the tax cuts, which may or may not help the economy, the repeal of don't ask don't tell is a substantial change that a lot of people wanted out of him.

Also now thanks to the Senate, we can eat meat without fear of mad cow disease. In a late night sessions the Food Safety and Modernization Act was passed. You would think after we had so many close calls with food imports the last couple of years this is something that would have been done. But this is the first time food safety regulations has been improved in almost one-hundred years.

One of the bigger items which looks like it will be passed this week is the START Treaty. A post Cold War agreement between the U.S. and Russia that every Secretary of State (Republican and Democrat), says needs to be passed, and Senator Kyle is holding it up. This was the wrong issue to try and score political points with. This treaty has always had bipartisan support and has reduced the number of nuclear weapons around the world. The situation has become so bad that Russia is weighing in on the Senate. This did not have to be a political victory for Obama, it will only become one because some members of the GOP were so outspoken against it.

One piece of legislation that did fail was the Dream Act. It is a shame because it made the process for immigrants to come into this country easier and they would have had less of an excuse to try and sneak in. It's also a way to reduce the deficit. The new immigrants coming in could have been taxed, and there were provisions making it easier for current illegal immigrants to get green cards. Now billions of dollars will be sent back to countries of immigrant families. Just more proof no one really cares about the deficit.

And it looks like the federal government will shut down this year! After the House passed a short extension for the start of the new year, Senator Reid announced the Senate will do the same. I'm OK with this, I loved the 90's.

What has helped get these pieces of legislation passed is the election being over. There is a full two years before the next election, and most public officials figure what they do now won't hurt them down the road. Especially if you are a Senator who only runs every six years. The rest of the time you are looking out for your state and helping your colleagues when you can.

Most of the legislation being passed this week was held up because the Republicans were filibustering it. When you hold up one piece of legislation it takes a longer time for others to come up and dealt with, especially in the Senate. But with a divided Congress next year it is hard to tell if compromises will be made.

It is a good sign that legislation is finally moving through. We just learned today that one of every seven Americans is now on food stamps. Needless to say, people need government to work. But as soon as the new year starts, the next election cycle will begin, making it important to pick battles carefully.

 

 

 

Tax Cuts Don’t Stimulate The Economy

I hate leaving things for the last minute. Having something hanging over my head just bothers me to no end it always get to the point where I can't sleep until it's done. The political problem for the tax cuts was that the White House waited until the last minute to deal with it, but probably for the right reasons. President Obama has had major legislative victories which will help a lot of people. Making sure women are paid equally, allowing students to stay on their parents insurance after college, and expanding scholarship opportunities to pay for college, just to name a few. As we've all seen those victories didn't just come over night, and unfortunately for Mr. Obama, there was still one last thing he had to get done.

The latest round of tax cuts which will soon be passed by the Senate is being sold so that it will help everybody, the middle class, working class, and of course the rich. The Center for American Progress is defending the tax cuts and claim it will create 2.2 million jobs. What their analysis assumes though is that businesses will spend money and there will be a demand for their products. But if you look at recent experiences, you should know there is no guarantee that businesses will spend more money just because they have it. In these uncertain times, they are more likely to keep it in case the economy goes even more down hill, just like the banks are doing since they received the bailout money. The business cuts aren't even targeted anywhere which proves there is no strong demand for anything right now. Otherwise, policies could be enacted to create more of a demand to help a strong area grow even more, which could help overall growth. That absence is just more proof the economy is really up in the air.

The Center got these numbers from the Congressional Budget Office (CBO) and used their numbers to create their analysis. The CBO however, assumes that the tax cuts will be offset by increasing taxes later so we won't have to worry about deflation. And it does not even take into account that Social Security taxes are being lowered.

But then there are some analyses I just don't get at all. The Heritage Foundation argues that only tax cuts can stimulate the economy. They try and differentiate between "Disposable Personal Income" and "Personal Spending." Now if you're a middle income family earning $150,000 a year, you have enough to go out to dinner, a movie, and keep up with your mortgage payments. But this family is not going to spend money on anything extravagant. They will not be buying a new house, car, or plan a expensive vacation in this time of uncertainty. So when they receive a tax cut, they will not be spending in the areas where it MIGHT help the businesses feel a demand for their products. And if you are working class family, you are more worried about feeding your children and keeping a roof over your head, and that's where they will spend the money. Again, not creating a huge demand for anything, and not beneficial to helping the economy. Families don't think of their money as "disposable" or "personal," and neither should economists.

Instead, programs should have been created to help families cope with the new economic realities. The best part of the package was getting unemployment benefits extended for a year. For middle class families though, there should have been money spent to pay for their children's college, or help lower their payments if the banks unexpectedly raised the interest rates. But if you don't believe me, you can listen to President Reagan's former budget director David Stockman, who helped invent trickle down economics.

The problem with both of these analyses is that they argue broadly about policies that need to be looked at in a more specific design. As I've argued in the past, current economic models do not allow economists to take into account what really matters to families. The tax cuts families receive will be spent on areas that will ensure the families stability. President Obama could have made a strong argument to raise taxes on the wealthy to ensure programs like Social Security and Medicare stay intact. Many people rely on these programs, especially the baby boomers. Who, by the way, will be retiring soon and who will vote in 2012. But by waiting this long to deal with the Bush tax cuts he had no time. The consequences, politically and economically, would have been worse if he allowed everyone's taxes to be raised. He had to let high income earners taxes stay low. It was a classic no win scenario.

All in all, no harm was done, but unfortunately not a lot of good was done either. So lesson learned, don't wait for the last minute to get your ducks in a row.

 

 

 

 

 

We Need Energy

If you want evidence that only funny characters and what they say dominate the news media, try figuring out the latest debate on taxes. The Senate "worked" this weekend on the nations taxes. But since the United States Senate requires hours of debate before a vote can actually take place, it makes it easy to waste a lot of time. So unless you are a C-SPAN2 junky (like me) you missed hours upon hours of our elected officials talking about how they were going to vote.

[Quick side note: Notice how I didn't say debate to describe what the Senate was doing this weekend. The Senate doesn't debate anymore. If you want to read a great debate, look up Second Reply to Hayne, given by Daniel Webster.]

But don't worry, Senator's don't get paid overtime. After all that talk the only agenda that was accomplished was playing politics. Only two votes were taken and both sides knew they were going to fail. Democrats said they wanted to show Republicans only support the rich, and Republican's refused to raise taxes even though they claim to want to tackle the deficit. Now it looks like all the Bush taxes will be extended. The good news is that unemployment benefits will also. The bad news is that even if Democrats somehow manage to raise some taxes, Wall Street is already trying to figure out how to not pay them.

What both sides forget though is that Americans aren't looking for a show, they're looking for things to get done. While building Noah's Arc in Kentucky may seem funny, it is a policy that will create jobs and help the economy. It shows leadership and strength, which is exactly what people are looking for.

One of President Obama's problems the past two years is that he let Republican's control the debate on all the issues. Whether it was health care or Wall Street Reform, the Obama never used the bully pulpit to the extent other Presidents like FDR or Reagan did. Even though both President's lost seats during their midterm elections, their base was ready to fight for them when they were up for reelection, and they won big.

The State of the Union speech is coming up soon. It will be a moment where the president can set the agenda and tone for the next two years he is in office. The first issue he should talk about is energy. This is an area where Republican's and Democrats can make themselves happy. Obama already came out in favor of nuclear energy, which Republican's have been pushing for years. Wind and solar energy have are already a growing industry. With the right incentives, creating new energy industries can create thousands of jobs that can't be shipped off. The best part is that the technology for these new industries is being developed in America, and that means more exports which (according to standard models) will help America's economy grow.

President Obama not only needs to create more energy, he also needs to show more energy. Letting the other side control the modern hyperbole of a debate, only takes away the victories he has already accomplished. We all know what a great communicator he can be, next year, it's time to step up and speak loud.

 

 

Building A House

Remember when Republicans were saying: government should act like American households when it comes to its budget? It was a great line. Short, easy to understand, and appealed to the GOP base (aka Tea Baggers) which allowed them to get excited. It then culminated with the recent shellacking this past election. The household analogy was used time and time again even though it was false. While it would be great to be able to print our own money (or if money grew on trees), we gave that right to the federal government when we ratified the Constitution.

But because elections have consequences, the two parties will be fighting to show who is most fiscally conservative. Obama announced today that he will be issuing a two year pay freeze that will save the federal government two billion during current fiscal year, twenty-eight billion over next five years, and sixty billion over ten years. While it sounds good on paper, it's really a political move. It's worth pointing out that it won't really be known how much is being saved until President Obama is out of office. And it's no accident. That way the White House can keep citing those numbers as a way to say the deficit is being reduced. Also, the pay of federal employees isn't the problem, it's the benefits they get that is driving costs up. That's why Defense Secretary Robert Gates is looking at ways to raise funds for the militaries Tricare. Of course, the new health care law will help maintain some of those costs, but apparently most of the new GOP governors won't enact the policy in their states.

This pay freeze announcement comes on the same day that several liberal think tanks are unveiling plans that are trying to tackle the federal deficit, all of which cut programs by federal agencies. In the meantime, government bureaucrats are always lobbying to keep their programs running. Think of it as an annual review where you have to tell your boss what you did this past year. You have to go through everything to show what you did while having to worry about keeping your job. Government agencies worry about the same thing, except it's all the time. They will give grand presentations, trips, gifts, and anything else that is legal to make sure they get the funding they think they need. While Obama doesn't have a J. Edgar Hoover problem, he still needs to make sure his employees are happy.

And do I even need to go into the special interest lobbyists like Jack Abramoff? There are plenty of those guys too. But whether you know it or not, you too have someone lobbying for you. For instance, do you want to save the environment? There are plenty of environmental groups out there who talk to members of Congress and their staff every day. Just look up The Environmental Defense Fund and read about how the Environmental Protection Agency was created.

One of the most contentious issues when it comes to the budget is taxes. No one likes them, and if a politician ever talks about them, he/she better say they will be lowered. But if you want a balanced budget someone's gotta pay for it.

The White House is right on this one, extend the Bush tax cuts for the middle class and let them expire for the rich. When people earning over a million dollars get a tax cut, they don't spend the money, and it does nothing for the economy. What makes raising taxes even more volatile this year is that state governments have had to raise their taxes over the last four years. So if Congress does nothing, the people who need help the most will be giving more than they can. Middle and working class Americans need the break and will spend it on the items they need to live, which will also help the economy. They deserve the extension.

It is baffling me how many Republican candidates are considering running for President in 2012. Just today John Bolton (who has never run for public office before) is thinking about running for President. Political Action Committees are already in the first couple of primary states for Mitt Romney, and Sarah Palin will probably run as an average Joe just to make a few more million. In the meantime, decisions need to be made, and the people who actually have to balance their budget are hurting the most.

Pre-Election Mortem

Watching this election cycle has been like watching a movie that's really bad but you can't manage to walk out of the theatre. The Tea Party is the stupid friend who is funny (think Zach Galifianakis), the Republicans are the guys who seem alright but keep getting everyone else into the dumb situations (Mike Myers in Wayne's World), and the Democrats are supposed to be one of the main characters but you really have no idea what they're doing there (Gene Hackman in Heartbreakers).

The Tea Party has managed to nominate people with no political experience, or for that matter any experience, and single handedly made what should have been strong races for Republicans and turned them into toss ups. Harry Reid was behind more then ten points in generic ballots (at which point a politicians tombstone is usually being built), but has been able to make Nevada a close race. But he can only thank his opponent Sharron Angle who made demoralizing comments toward Latinos. Alaska shouldn't even have been a contest with the conservative Republican Lisa (spell my name) Murkowski, but I guess she wasn't obnoxious enough for the Tea Party. So instead, the nomination goes to Joe Miller whose claim to fame is being a lumberjack. And then there's Christine O' Donnell. Running for Vice President Joseph Biden's former seat, she lied about finishing college, her personal finances, and being a witch.

Since the Tea Party has become the main character the Republicans can't get rid of them. They need them for the movie to go on and to win on Tuesday. Even with this apparent hijacking, the Republicans can't say anything because they need the Tea Party. Unfortunately, most people don't vote in the midterm election, and less in the primary where the people listed above became famous, which give these small groups more influence.

After passing two historic pieces of legislation, the Democrats aren't able to come up with a strong message to tell voters. President Obama should be proud of what he's accomplished in the past two years. But part of being President is also being Communicator In Chief. While the debates for health care and financial reform were taking place, he should have been out there talking to the people and saying what he wanted passed in this legislation. He knows he will be compared to other Presidents like FDR, Theodore Roosevelt, and Ronald Reagan. While on paper they've accomplished similar feats, Obama didn't use the bully pulpit like the others did to win the political points he needs right now.

My prediction for Tuesday: Democrats lose 23 seats in the House and the Republicans are one short of taking the Senate. The script for this disaster will be spun in two ways. Republicans will say it is a referendum on President Obama and his agenda. Democrats will say there were seats we knew we were going to lose, while historically, new Presidents always lose seats in the midterm elections. Democrats will look like they're giving excuses, and they are. I know I've said this before, but for a campaign that was so good at delivering a message and being clear as to what they wanted to accomplish, you almost wonder how they won just two years ago.

Not having a strong message explains the big difference between voter enthusiasm gap between Democrats and Republicans. Liberals feel they worked so hard to elect a candidate they believed in and they still got the short end of the stick. But change has always been slow. With these types of movies there is usually a sequel or a spinoff, but it doesn't necessarily means it is as bad. Maybe next time the Democrats can figure out what to do.

 

 

Capability vs. GDP

Goals are important. They give us something to strive for, get us to make the tough decisions that life requires to accomplish them, and in an ever complicated world, can help keep us focused on what is really important. For public policy purposes though, determining how to assess goals can be controversial. How can you count for hundreds of millions of people, and still implement public policies without interfering on what those same people want to accomplish for themselves?

Coincidently, in a time where many people are saying how economists are failing us, I completed my thesis on how new economic methods need to be used to assess a countries development. What economists are currently accounting for are inputs and outputs, how much it costs to produce the product, and how much money can be made by selling it. I don't want to say this is a bad thing. There are legitimate arguments out there on why these numbers are important. For businesses to hire people, they need an estimate how much they are going to make, and how much of a loan they need from a bank.

But while the Great Recession has been over for a year, the poverty rate in the United States has dramatically increased. The organization that punched these numbers is highly respected, and all they did was their job. They saw Gross Domestic Product (GDP) went up three quarters in a row and declared everything was fine. Unfortunately, there are millions of people out there who would tell these economists differently.

GDP only accounts for the health of businesses, not the population that keeps them thriving. Instead of assuming that if businesses are prosperous the people are too, economists need to develop new goals that take into account for what people need in order for them to achieve what they are working towards. My thesis focused heavily on the work of Amartya Sen and his Capabilities Theory. This theory focuses on human development, bringing it back to the basics of education, health care, housing, freedom, democracy, and other factors, in order to ensure people are given a chance to accomplish the goals they set for themselves.

In his recent struggles to get the democratic base out to the polls, President Obama stated that during the Bush administration personal family incomes had fallen. But still, most economists thought the economy was good because GDP was going up. The fact is recessions happen, whether in a time of strong regulations or weak ones. You just have to hope they're not as bad as the one we are in now and they don't turn into a depression. What is great about the Capabilities Theory is that when recessions do happen, policies are already in place to make sure people are protected. By having economists measure basic goals that all people need, individuals will still have the opportunity to decide what they want to accomplish for themselves because they were given the capability to do so.

Of course, while democracy is a important for the Capabilities Theory, there are numerous examples that can be used to show how politics can be really stupid. Gail Collins had a good piece today on how some of the major races in the coming election have been outright dirty, where the candidates have resorted to political mudslinging. While the politicians and their advisors may see attack ads necessary to get their base out, it turns just as many people off, and doesn't get any more people to vote for the person who put out the commercial. Even the numbers that economists come out with are at times manipulated to further a public officials agenda. But if new assessments of goals based on the Capabilities Theory were implemented, it would be harder to spin how many people are receiving a strong education, living in a safe neighborhood, and have what they need to support their families.

Elected politicians don't get reelected on what they say about their opponent, it's on their own record. By focusing on the people, instead of the corporations, elected officials will know what areas to focus on and try to do something about it. Then, it would be a lot harder for their opponent to come up with legitimate attacks.

This post may seem like a utopia to some people, but I am well aware there will always be socio-economic differences. But when I first learned about the Capabilities Theory, it was one of those things that just made sense, and hopefully after going through this tough time, more people will think it makes sense as well.

 

I Haven’t Heard The Fat Lady

As the 2010 election gets closer and closer, it seems like everyone is trying to figure what the results will be and who's going to win where. The story lines are great too. The Tea Party is two steps away from taking over the Republican Party (they're already old and have party in their name), Robert Gibbs' media flaps, Momma Bear Sarah Palin, and President Obama's approval ratings. And with all that, the election is still up in the air.

It shouldn't come as a surprise to Democrats that the party without an agenda seems to have better winning odds. Finding holes or problems with policy ideas are easy. No policy is perfect and in today's twenty-four hour media, blogs (except for this one), and Twitter, it's easy to get as much bad information as much as there is good. But then you have to ask yourself, how many people realize the amount of money that will be saved by the new health care law ($143 billion), that the government actually made money from the TARP program ($201 billion), and we don't even know how many more jobs would have been lost if not for the auto bailout which all recently reported strong earnings. Governing is hard, and even though the Democrats did a good job communicating during the campaign, it's hard to juggle the two acts at once.

There are economists who fear deflation, and the unemployment rate is still staggeringly high (9.5%), but there are no actual facts that can be used to blame President Obama or the Democrats to say they have made it worse.

The Democrats should be touting their victories while they campaign, and Obama is finally doing so. The latest Third Way poll shows that the American people don't want to go back to the policies of the past. Even with all the craziness out there, I still believe that (especially since we are in such troubled times) people pay attention. The American people want answers, and the Democrats have legitimate evidence to show their policies have been working. So let the Republicans have no agenda, let them try and say things are worse from when they were in charge, and while doing so, ask what they would have done differently.

The only way the Republicans can actually claim victory is if they take over one of the Houses in Congress. But according to Real Clear Politics, both are still very much in play. I haven't heard the fat lady sing yet, and neither should you.