Tuesday, November 25, 2008

Dick Armey's Financial Solution

Former House Majority Leader Richard "Dick" Armey has joined the chorus of Republicans calling for the death of the auto industry. Armey leads an activist group called freedomworks.org whose alleged mission is to reduce the size of government and cut taxes. He recently wrote on behalf of this organization:

"So far, the forgotten man, the middle-class U.S. taxpayer, has had to bail out Wall Street, AIG, Fannie Mae and Freddie Mac. We are sick and tired of having to pay for the recklessness of others, and we are not going to take it any more."

I can only assume that his use of the term "we", refers to the multi-national conglomerates his party represents who have been shipping American jobs overseas for the last thirty years. It certainly doesn't apply to the three million auto workers doomed to unemployment by his plan.

Former Representative Armey consistently supported the Reagan policy of deregulation. The Reagan era deregulators asserted that industry dynamics would create an atmosphere of self-regulation. They argued that this market driven business environment would keep corporations honest and provide the best prices for consumers. The crumbling financial markets seem to indicate that their argument was exceptionally flawed.

The argument that the Automakers, and their three million jobs, should be allowed to pass into oblivion is based on the same logic as were the principles of deregulation. Corporations should not be restrained, restricted, nor bailed out by the Government. Sort of a Darwinian version of capitalism where the strong survive and the weak die off. Unfortunately, in this model the strong who survive are the Corporate leaders and the weak are the workers and consumers.

The last thing America needs to do is to follow the advice of those who's policies created this catastrophe. Particularly when the advice is once again to let corporate nature take its course. I argue that corporate nature is taking its course. Corporate nature is self destructive and corporate greed eventually unhinges the social structure which enables the profitability and ultimate survival of corporation. Unrestrained corporations focus only on short term profit margins and lose sight of everything else.

I believe that Dick Armey and his army of deregulators should be shut out of the rescue process. In fact, their advice should be accepted only for its value as an indication of what actions should not be taken.

Monday, November 17, 2008

Is Detroit the Decider

As America's economy teeters on the brink of collapse, it is necessary to evaluate the pillars of our economic system. Certainly the Government can't save every mom and pop store from bankruptcy, but allowing the wrong pillar to fall could collapse the building. Detroit's automakers may very well be the last shaky column. Though the auto industry does not support the economy, its effect on the job market would be enormous should it fail. If the U.S. auto industry falls, three million jobs immediately disappear and the natural flow of things that free marketers tout as the solution becomes Niagara Falls.

The Japanese and European automakers salivate at the thought of three giant competitors falling. The idea that consumers will still purchase vehicles from auto manufacturers who are in the midst of chapter eleven is wishful thinking. Chapter Eleven procedures for a manufacturer creates the natural consumer fear of purchasing an obsolete product. This will mean a near halt in sales and the end of America's portion of the worldwide auto market, one that we are not guaranteed to regain.

The Republican Party is fighting the auto industry bailout and gambling that Detroit is not the final nail in our economic coffin. Three million auto workers and likely five times that number of related jobs may be more than America can handle both emotionally and in real dollars. Consumers may panic and freeze spending killing the last hope for avoiding a depression. If the Congressional Republicans have their way President Obama will be rebuilding the U.S. economy from the ground up, but they'll have nothing to rebuild.

Thursday, November 13, 2008

Obama Must Ignore the Deficit

President Elect Obama faces a daunting economic task which is complicated by a massive federal deficit. The conventional thinking is that he must find a way to revitalize a near dead economy without increasing the deficit. My suggestion is that he ignore the conventional thinking and concentrate his efforts solely on revitalizing the economy. The federal deficit is a long term problem which will be of little consequence if the economy falls apart in the short term. A ship with a gaping hole below the waterline must fix the immediate problem before plotting a new course to avoid future icebergs.

Targeting working class Americans with tax cuts, freezing home foreclosures, and infusing capitol into infrastructure projects will undoubtedly increase the deficit. However, these actions will improve consumer confidence and create badly needed jobs. Once the economy begins to turn the corner President Obama can slowly return the government to fiscal responsibility and begin to work on the social reform agenda which helped propell him to power. Bill Clinton's first major economic package passed without a single Republican congressional vote. Passing an economic package which increases the deficit may not be easy, but this is not the time for easy politics. An expensive economic stimulus package may create a target rich environment for his enemies in the short term, but the alternative is to play the traditional political game as expected, and fail.

Saturday, November 08, 2008

Republican Woes

The Republican Party is suffering from a classic problem, climbing the ladder of success only to find that it is leaning against the wrong wall. The Party worked for many years to create a base of supporters who would accept a rigid right wing ideology as part of their culture. The strategy has been very successful in the Southern States and has taken hold to some extent in many other parts of the Country. This Republican base amounts to the last 22% of Americans who still support President Bush. Unfazed by the dramatic economic and political consequences of the last eight years, they also make up the lions share of the 64% of all Republicans who want ultra-conservative Sarah Palin as their 2012 Presidential nominee, a desire that is likely shared by 100% of all Democrats. The GOP has successfully convinced them that the political center is really the left, and that this imaginary left is the enemy of God and social order. That being the case, any policies supported by the "left" would be immoral by default.

Having been soundly rejected by the electorate, the Republican Party is left to dress its wounds and develop strategies for 2012. During this election cycle the voters sent a clear signal that political moderation is in order. As a result some GOP pragmatists are signalling a willingness to accept some level of bipartisanship and move somewhat reluctantly towards the center. The problem they will soon encounter is that they have so effectively trained their base to be extremist that they will reject any move towards ideological moderation. Southern Republicans in Congress may face losing to more conservative challengers in the next primaries should they move towards the center, the only likely salvation for the party as a whole.

The Grand Old Party is in a "catch 22" situation. If they moderate their ideological positions it will get them some desperately needed mainstream support but it will infuriate their base. If they double down on their conservative positions they solidify their base but move farther from the new political mainstream, particularly the youth vote. I suspect we will hear the Party leaders invoke the name of Ronald Reagan and proclaim that they intend to return to the conservatives values of his era. As the Country moves forward, their fateful strategy will be to move forward by going backwards 25 years. Their effectiveness in creating an extremist base is proving to be a bittersweet success.

Monday, November 03, 2008

Grounding the Polls

The latest polling data can be interpreted to predict either a blowout for Senator Barack Obama, or to indicate that Senator John McCain is easily within striking distance. Many of the critical state races are either within the margin of error, or close enough to give the challenger a reasonable opportunity for victory. Should the margin swing just a few points in several states, Senator Obama's sure victory becomes a razor thin loss.

However, the polls are just one part of the data which predicts the outcome. The best analogy I can summon is that of a swimmer recognizing an object approaching him as a shark's fin. The fin is a sure sign of serious danger, yet it is only an indicator. The real danger is below the fin, the part that actually does the biting is below the surface. The Obama team's ground game is deadly.

Howard Dean's 50 State strategy is clear and apparent in the Obama game plan. The Obama campaign is dedicating huge amounts of money and effort to the grassroots efforts more commonly referred to as the "ground game." The strategy of investing heavily in the field work and aggressively attacking the Republicans in states which they traditionally carry will show up much more prominently at the polling booths than has been reflected by the polling data. The poll numbers do not accurately reflect the effect of the Obama Camp's 5 million nationwide volunteers and their herculean two year effort to register new voters. Hundreds of thousands, or more likely millions of these new voters will not show up in polling data as likely voters, nor be counted in any of the pre-election statistics. Many non-traditional voters have only a cell phone and therefor will never receive the calls necessary to be counted in the traditionally run polls. The Obama grassroots numbers are astounding; 5 million volunteers, over 400,000 doors knocked on daily, and 82 field offices in Ohio alone. In Montana, nearly 25,000 new voters between the age of 18 and 35, a demographic which heavily favors Obama, were registered since January 1, 2008. This in a State which saw only 456,096 votes were cast in the 2004 election and currently shows dead even in the polls.

I predict an overwhelming victory for Senator Obama. Senator Obama will quite possibly carry every coastal State from Maine to Florida and a number of Congressional races will be shocking upsets in favor of the Democrats. Both Georgia and South Carolina have strong chances of turning blue due to African American and youth turnout. There will be nothing remotely close about this election. Come Wednesday, you'll likely need a history book to find a Republican in Congress. How long before the news pundits give Howard Dean the genius status they awarded Karl Rove?