Saturday, July 31, 2010

D.C.’s Michelle Rhee Fires 241 Teachers

When D.C. Schools Chancellor Michelle Rhee signed a contract with the teachers union last April that boosted their salaries while allowing them to be fired under a new evaluation system only when lack of funds or low enrollment caused school closings that created excess teachers, I called the agreement a poor “compromise.” To me, it looked like Rhee had caved in order to help her protector, Mayor Adrian Fenty, in his tough re-election battle.

Here’s why I may have got it wrong. Rhee has just fired 241 teachers, 4% of the teacher total. Apparently, D.C. is closing schools, thus kicking in the contract provision I thought would go unused.

Rhee has also put another 737 teachers on notice they may go next year. Taken together, the total number of teachers potentially affected is 25% of D.C.’s 4000, a serious share of the workforce. Moreover, her contract allows Rhee to reward those at the top end of the evaluation process, an additional major step toward differentiating among good and bad teachers. Finally, Mayor Fenty, still locked in a tough battle for re-election, is totally behind Rhee’s actions, suggesting he thinks his efforts to improve D.C. education might work for him politically. If Fenty wins, the Rhee-Fenty combination may start to shake the unions’ nationwide grip on teacher firings.

That would be big news.

Dark before the dawn: History

In his seminal political science book Essence of Decision, Graham Allison dealt briefly (pp. 261-63) with a question America was asking itself in 1971, the year Allison published his work. The question: “Why do we keep fighting in Vietnam when we know we’ve lost?”

The real darkness before the dawn comes from continuing to accumulate losses past the point when the costs of prolonging a struggle outweigh the benefits. Dawn comes when the struggle ceases. It’s Kaprun, Austria (picture), where the “Band of Brothers,“ after their fight across northern Europe, finally settled once Germany surrendered—several months/years too late for millions of casualties.

Allison said people keep fighting past the logical surrender point because they don’t have organizations feeding them accurate information about the enemy’s strengths or their own weaknesses, they underestimate the strategic costs of continuing, and top leadership gains unfiltered access only to the most highly visible costs of struggling (organizations distort the rest). Also, since most organizations consider treasonous any serious look at surrender, the option gets short shrift.

Not only organizations get in the way. At the top, anybody with a career closely identified with the struggle rarely sees the costs of continuing outweighing the benefits. Other high level voices are discounted because they always opposed the struggle—their views don’t mark any tipping point. Change comes either when an internal political shift aids the opponents of continuing, or when the outsiders who are winning the struggle do something that alters the balance between those wanting to continue and those wanting to quit.

Famous unnecessarily dark periods include Vietnam in 1966-75, after McNamara first realized the U.S. could not win, most of World War I (1914-18), after Germany’s surprise sweep through neutral Belgium failed to knock out France, much of the Great Depression (1935-40), after Roosevelt turned away from the economy in mid-1935 to focus instead on the politics of re-election (Shlaes, p. 246), World War II after Germany failed to invade Britain but invaded the U.S.S.R., and Japan attacked the U.S. (1941-45), Southern resistance to integration after Jackie Robinson, Truman integrating the military, and Brown v. Board of Education made integration inevitable (1954-65), and Nixon hanging on for 17 months after Watergate burglar James McCord began talking to federal authorities.

Our current dark period began with the elections of Republican governors in Virginia and New Jersey last November, states Obama carried a year earlier. The defeats should have shown the Obama political team they needed to shift course, and start governing as leaders of a whole country, not just its liberal fifth. Month after month, we pay an economic cost for Obama’s unlearned lesson. Dark before the dawn.

Monday, July 26, 2010

Dark before the dawn: America

China is the most dynamic country in the world today. By itself, it is remaking the world map. Its heroes are hundreds of millions of hard-working people, released by economic freedom to better themselves and their families.

We fear darkness from China's leadership riding the tiger of a popular surge it barely controls. We fear some misbegotten effort to tame the tiger will turn out bad for the world, before China eventually reaches political freedom.

This blog has repeatedly come back to America’s own darkness before its dawn, the elite’s current rearguard fight to hang onto power by enlarging government control over our capitalist system. People who once won, such as our current elite, fight harder to hold onto what they have than do those yet to win.

The elite’s struggle to hang on is bound to fail, sooner or later. Listen to George Will:
We are not Europeans. We are not, in Orwell's phrase, a "state-broken people." We do not have a feudal background of subservience to the state. No, that is the project of the current administration - it can be boiled down to learned feudalism. It is a dependency agenda. . .The American people . . . have nothing to fear, right now, but an insufficiency of their fear itself. It is time for a wholesome fear of what people with a dependency agenda are trying to do. We have few allies. We don't have Hollywood, we don't have academia, and we don't have the mainstream media. But we have . . . arithmetic. The numbers do not add up, and cannot be made to do so.

And listen to Thomas Sowell:
How [is it] possible that transferring decisions from elites with more education, intellect, data and power to ordinary people [leads] consistently to demonstrably better results? One implication is that no one is smart enough to carry out social engineering, whether in the economy or in other areas where the results may not always be so easily quantifiable. We learn, not from our initial brilliance, but from trial and error adjustments to events as they unfold.

Science tells us that the human brain reaches its maximum potential in early adulthood. Why then are young adults so seldom capable of doing what people with more years of experience can do? Because experience trumps brilliance. Elites may have more brilliance, but those who make decisions for society as a whole cannot possibly have as much experience as the millions of people whose decisions they pre-empt. The education and intellects of the elites may lead them to have more sweeping presumptions, but that just makes them more dangerous to the freedom, as well as the well-being, of the people as a whole.

Sowell’s statement is simply the most brilliant I have seen about why the people win out in the end. Economic determinism by Adam Smith triumphs over that of Karl Marx.

Saturday, July 24, 2010

Dark before the dawn: China

It is always darkest just before the Day dawneth.

-- Thomas Fuller (1650)

In the long run, China will be free, under the rule of law. How to get there; that’s what frightens us. The dark before the dawn.

Geremie R. Barmé, director of the Centre on China in the World at Australian National University, writes about the overseas Chinese. He says overseas Chinese are playing a crucial role in China's economic reform, especially helping integrate China into the global economy.

Figures supplied along with Barmé’s article tell us that, including Hong Kong (residents carry separate passports from the mainland’s), there are 66 million overseas Chinese. If they were a separate nation, they would be the world’s 20th largest country, bigger than France. But as overseas Chinese, they are more important than France, because of their impact on China, the world’s #1 country in population, and its #2 economy. The 55% of overseas Chinese from Taiwan, Hong Kong, Singapore, the U.S., Canada, Australia, and Britain, largely connected by at least two languages including English, are especially well-positioned to influence China’s future.

Still, Barmé has a warning:
To be Chinese [leads to an] expectation that you understand the overt rules as well as the unspoken codes of your native land. . . When things go well and there are opportunities to be grasped, the overseas Chinese, with their inside-track appreciation of the distinctive modus operandi in the People's Republic, ride high. When [things don’t], however, these intuitive insiders, the commercial compradors with local knowledge, are particularly vulnerable.

One overseas Chinese is Minxin Pei, Adjunct Senior Associate at the Carnegie Endowment for International Peace. Pei is, presumably like most overseas Chinese, hopeful China is progressing toward the freedoms enjoyed by Chinese abroad. He writes:

➢ [signs exist of a] broader political re-awakening in Chinese civil society

➢ migrant workers who have risked their jobs and personal safety [are] joining. . . strikes

➢ if . . . authorities fail to end the current labour unrest in foreign-invested firms, disgruntlement will likely spread to workers in . . . construction and mining, where working conditions are dangerous and pay extremely low

➢ [Chinese activists] focus on issues directly related to their economic interests, property rights and social justice. . . fighting off local governments’ attempts to build polluting factories, seize farmers’ land without compensation and evict urban residents from their homes

➢ criticism of government policy and performance in delivering public services and protecting social justice are routine in Chinese publications and on-line venues

➢ the information revolution—a direct result of economic modernization—has helped change values and reduced the costs of organizing collective action[, and] magnified the political impact of such moves

➢ the rapidity with which the latest labour unrest has spread would [be] inconceivable without . . . the Internet and cell phones

➢ rising physical mobility [gives] ordinary Chinese . . . opportunities to compare . . . conditions [in] diverse localities, [gaining] awareness of the political and social injustice [at home] and becom[ing] less tolerant of such injustices

➢ the Communist Party’s own populist rhetoric has . . . raised the people’s expectations, but meeting those expectations would be economically costly (more redistribution and social welfare) and politically risky (greater popular political participation)

➢ [it’s] harder for the government to continue . . . its post-Tiananmen strategy of promoting economic growth at all cost[, creating tensions leading] to greater disunity within the elites [with some] tempted to exploit rising populism for personal political advantage

Still, Pei concludes, “Most activities that challenge government authority are uncoordinated, disorganized and short-lived.”

Wednesday, July 21, 2010

Harvard Takes on Princeton

Niall Ferguson is a Harvard professor of economic and financial history who has a concurrent appointment to Harvard Business School. He’s engaged in an ongoing public debate with Paul Krugman, the Princeton Nobel Prize winner in economics, and America’s best-known advocate of spending our way to prosperity. Krugman’s views appear regularly in the New York Times. Here are Ferguson’s:

➢ the second world war. . . saw the US embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war. . .

➢ the differences are immense. First, the US financed its huge wartime deficits from domestic savings, via the sale of war bonds. Second, wartime economies were essentially closed, so there was no leakage of fiscal stimulus. Third, war economies worked at maximum capacity; all kinds of controls had to be imposed on the private sector to prevent inflation.

➢ Today’s war-like deficits are being run at a time when the US is heavily reliant on foreign lenders, not least its rising strategic rival China; at a time when economies are open, so American stimulus can end up benefiting Chinese exporters; and at a time when there is much under-utilised capacity, so that deflation is a bigger threat than inflation.

➢ Are there precedents for such a combination? Certainly. . .Argentina [and] Venezuela used to experiment with large peace-time deficits to see if there were ways of avoiding hard choices. [But] either the foreign lenders got fleeced through default, or the domestic lenders got fleeced through inflation.

➢ [By 1981, Britain] had discovered the hard way that deficits could not save [it]. With double-digit inflation and rising unemployment, drastic remedies were called for. [It took] “regime-change” [to] bring stabilisation, because only that would suffice to alter inflationary expectations.

➢ People are nervous of world war-sized deficits when there isn’t a war to justify them. According to a recent poll. . . 45% of Americans “think it likely that their government will be unable to meet its financial commitments within 10 years”.

➢ The remedy for such fears must be the kind of policy regime-change . . . Thatcher and Reagan . . . implemented. Then, as today, the choice [is] between policies that boost private-sector confidence and those that kill it.

Monday, July 19, 2010

A Democrat Takes on Unions

Mickey Kaus lost the California Democratic Senate primary to Barbara Boxer. He finished 3rd with 5% of the vote. He is a known contrarian who ran to give his views wider publicity. But he is a serious commentator known for his “Kausfiles,” one of the first-ever blogs and published until recently in “Slate.”

Kaus has problems with unions:
unions have . . . outlived [their] usefulness. What unions do is give workers democratically the right to choose a bargaining representative who’s then their exclusive representative. That’s the whole key to unionism. What are going to be the first demands of an honest democratic workforce? They’re going to demand you can’t fire me without notice and a hearing because we don’t want arbitrary firings. And when people gather in a group, they say we don’t make invidious distinctions by merit, we want promotion by seniority and layoff by seniority. Two perfectly reasonable things.

They happen to be terrible for an organization that wants to succeed because the due process hearings for firings inevitably become cumbersome and you basically give up firing people, and promotion by seniority means you only have to do well enough not to get fired and you’ll advance. There’s no incentive to doing really well. . .So, right off the bat, unions do not contribute to productivity. The question is, what all do they do that’s so good that compensates for this effect? I don’t see it anymore.

Public employees is a much worse situation. If a private sector union asks for too much and the company gives it to them, the company will disappear, as half of General Motors disappeared.

That incentive or disincentive doesn’t have impact in the public sector. All the union has to do is get some politician to vote a tax increase to pay the increased salary, and boom—they’re back in business. That’s what happened year after year and now it’s all coming to a head because cities and towns and states all across America are starting to go bankrupt under the weight of these generations of wage increases and pension increases that unions have won for themselves.

Public employees didn’t used to be able to organize. They had civil service protections. That was enough. It was only starting in the last quarter of the 20th century that politicians gave them the right to organize. . .

Pretty much everybody hates the teachers unions now. People who have kids in the public schools, people who are paying through the noses, $20,000 a year to get out of the public schools, send their kids to private schools, hate the teachers unions.

Sunday, July 18, 2010

The White Middle Class Vote

"white middle- and working-class voters who supported Hillary — and former President Bill — Clinton. . ., according to recent polls, are increasingly alienated from the Obama administration. Reasons include slow economic growth, high unemployment among blue- and white-collar workers and a persistent credit crunch for small businesses. . .About two in five Americans report household incomes between $35,000 and $100,000 a year. Right now, almost [60% of them] are deeply worried about their financial situation"

--Joel Kotkin, “Politico”

"the Democrats' 'middle-class problem'. . . means that there has been a spectacular collapse of support for the administration among the core blue-collar voters who should constitute its base. . . Americans who have risen from poverty to become qualified tradesmen or entrepreneurs generally believe that they have a right to put what wealth they produce back into their own businesses, rather than trusting governments to spread it around. . .

"startling is the growth in America of . . . an electoral alliance of the educated, self-consciously 'enlightened' class with the poor and deprived. America, in other words, has discovered bourgeois guilt [and] embraced noblesse oblige. Now. . . this sentiment is taking on precisely the pseudo-aristocratic tone of disdain for the aspiring, struggling middle class that is such a familiar part of the British scene."

--Janet Daley, Daily Telegraph (U.K.)

"neither party has made stable progress against the most intractable problems of our time -- particularly the stagnation in wages for average families. . . [L]ong-term . . ., Democrats have an edge because the voters most favorable to them (minorities and college-educated whites) are growing in the electorate, while the GOP's best group (blue-collar whites) is shrinking. But Democrats have not demonstrated that they can [hold] enough white voters to maintain a national majority."

--Ron Brownstein, National Journal

There seems general agreement Democrats are losing the white middle class. But “long term,” according to Brownstein, Democrats will prevail because minorities and “college-educated whites” are growing faster.

Yet who are these “college-educated whites”? Those in the suburbs of what Kotkin calls “aspirational cities”-- Atlanta, Phoenix, Charlotte, Las Vegas, and Florida along the Gulf Coast, are outpacing the suburban growth in Kotkin’s “Euro-American cities” like Boston, San Francisco, Minneapolis, Chicago, Philadelphia, and Seattle. Republicans stand to benefit from this geographical difference in growth, since “aspirational” means “red state”.

I agree Republicans must fight more effectively for the Hispanic vote--white, middle-class votes soon won't be enough. The key to winning Hispanic support, I feel, is effective immigration reform.

Saturday, July 17, 2010

Man Behind the Green Curtain

Charles Krauthammer is warning conservatives to curb their cockiness. He sees Obama succeeding in his first two years the same way Reagan did in his:

Just as President Ronald Reagan cut taxes to starve the federal government and prevent massive growth in spending, Obama's wild spending -- and quarantining health-care costs from providing possible relief -- will necessitate huge tax increases. The net effect of 18 months of Obamaism will be to undo much of Reaganism. . . The next burst of ideological energy -- massive regulation of the energy economy, federalizing higher education and "comprehensive" immigration reform (i.e., amnesty) -- will require a second mandate, meaning reelection in 2012.

The Obama-Reagan parallel Krauthammer sees is one I suggested in October 2008 and again in February 2009.

But will the parallel continue? Krauthammer says Obama is looking forward to another burst of energy after his 2012 re-election, a victory Obama’s midterm election defeat will help bring about the same way Clinton won re-election in 1996 after Democrats’ 1994 midterm election defeat moved Clinton toward the center. Yet Clinton didn’t have a transformative second term. And neither did Reagan, for that matter.

But will Obama even win re-election, much less enjoy a post-election energy burst? Reagan swept to re-election in 1984 because the tax cuts he put in place, along with Fed Chair Paul Volcker’s successful fight against inflation, turbocharged domestic growth.

Obama, by contrast, seems to be frustrating business—and therefore economic growth—by running up the debt and starving credit markets, increasing regulations, and raising taxes (rescinding Bush tax cuts). Obama’s anticipated midterm election defeat will lead to a one-term presidency unless he (like Clinton before him) changes course. And if he changes course, he’s a different person than the president Krauthammer tells us to fear. Obama can change and win. He can stay the same and lose. He can’t—in contrast to growth-generating Reagan—stay the same and win.

As we believe, only business creates growth and jobs. Adam Smith taught that restraining government allows the free market to flourish. Government ever since has been on the defensive, forced to use crises of capitalism to win back control over the economy. When Roosevelt became president during the Great Depression crisis, he shifted the balance away from business and toward government.

Subsequently, the big government-big business-big labor “Blue Beast“ (“blue” as in “blue state,” i.e., Democrat) delivered economic progress from World War II until 1964-65—the last time until today liberal Democrats had total political control. In 1966, inflation-based economic troubles began that didn’t end until Reagan’s time.

The divided government that, except for Reagan’s first two years, has characterized most of the time since 1966 had two legs: Republicans, who were right about business driving growth and creating jobs, and Democrats, who were right about using government to help the environment, women and minorities, especially blacks. When Republicans failed to provide growth and jobs in 2008, the balance shifted sharply toward Democrats. Now Democrats and Obama face two huge problems:

1. They have failed to get the economy working through government intervention, making business-based growth once again the more viable option, and;

2. Their success in ending racial inequality, personified in Obama’s election, has pulled away the moral authority used to justify big government, thus exposing the ineffective, over-compensated, often corrupt, business-destroying operation behind government’s green curtain.

It’s the economy, stupid.

Thursday, July 15, 2010

Politics of Fear (II)

Nat Hentoff, 85, is a strong civil libertarian who nevertheless holds idiosyncratic views. For one thing, he hates Obamacare. Hentoff’s all-out attack on Obama’s interim appointment of Dr. Donald Berwick (picture) to head the Health and Human Services' Centers for Medicare and Medicaid Services (CMS) suggests to me that Dr. Berwick could be the poster boy for a GOP election-year assault on Obamacare—the latest election villain, like Willie Horton (used against Dukakis in 1988) or Mark Foley (used against Republicans in 2006).

Dr. Berwick’s appointment is particularly controversial because:

➢ as Hentoff notes, Dr. Berwick is getting America’s most powerful health-care position: "CMS covers over 100 million Americans, has an annual $800 billion budget that is larger than the Defense Department's and is the second-largest insurance company in the world."

➢ Obama put him in office while Congress was in recess, giving Republicans no opportunity to question the doctor about his controversial views, and leaving the upcoming election the only available outlet for voter hostility.

Hentoff reminds us Obama told the American Medical Association any charge his health care plan would ration medical services is only a "fear tactic," and said flat out: "I don't believe that government can or should run health care." Yet Dr. Berwick is enthusiastically, openly candid in his support of Britain's socialistic National Health Service, having said: "I am romantic about National Health Service. I love it (because it is) 'generous, hopeful, confident, joyous and just.’”

Hentoff adds that Dr. Berwick’s:
"just" National Health Care Service decides which care can be too costly for the government to pay. Its real-time decider of life-or-death outcomes is the National Institute for Health and Clinical Excellence (NICE), [which] acts as a comparative-effectiveness tool for the National Health Care Service, comparing various treatments and determining whether the benefits the patients receives - SUCH AS PROLONGED LIFE - are cost-efficient for the government.

In the British Health Service Dr. Berwick loves, 750,000 patients are awaiting admission to NHS hospitals. The latest estimates suggest that for most specialties, only 30% to 50% of patients are treated within 18 weeks. For trauma and orthopedic patients, the figure is only 20%. Every year, 50,000 surgeries are canceled because patients become too sick on the waiting list to proceed. [And] Berwick tells it like it frighteningly [will be here]: "It's not a question of whether we will ration health care. It is whether we will ration with our eyes open."

Dr. Berwick: Obamacare’s “Dr. Death.” Using Dr. Berwick in the upcoming election, Republicans can fight fear with fear.

But should they? Maybe not, says Peter Wehner, writing in the conservative magazine, Commentary:
Politics . . . should be about debating issues to discern truth and understand, as best we can, the reality of things. It . . . should not be primarily about taking and keeping power. Power for its own sake — power detached from truth and empirical evidence — leads us down a very dangerous path.

Most of us who are active in politics have a tendency to overlook the flaws of our allies and accentuate the flaws of our opponents. That is a common human tendency [which] becomes entangled with the issue of loyalty.

In addition, very few of us are completely detached in our analysis or are free of biases and prejudices. . . [O]ne problem with political discourse in our age is that in the heat of debate, we too easily suspend a disinterested search for the truth and advance a more narrow, partisan aim. That leads to hypocrisy and double standards. . . We view the world through a tinted lens [when] we ought to . . . aspire to intellectual integrity and uphold as models those who embody it.

Peter Wehner, amen. Whatever Democrats do this election round, Republicans should avoid the politics of fear, instead elevating us with the politics of hope.

Monday, July 12, 2010

Politics of Fear (I)

Obama. . . regularly caricatures Republican views and ascribes to GOP lawmakers the most cynical of motives. “They figured, ‘If we just keep on saying no to everything, and nothing gets done, then somehow people will forget who got us into this mess in the first place, and we’ll get more votes in November.’ So their prescription for every challenge is pretty much the same — and I don’t think I’m exaggerating here —basically: cut taxes for the wealthy, cut rules for corporations, and cut working folks loose to fend for themselves. Basically, their attitude is: You’re on your own.”

--Keith Koffler, “Politico,” 7.7.10

I noted last January Democrats planned to make this fall’s election about Republican shortcomings; as one Democrat consultant put it, “kick the shit out of somebody.” So Obama not only blames Republicans for everything, but adds they are deliberately driving the country into the ditch to benefit the wealthy. Obama doesn’t bother to remind us Democrats have been running congress since January 2007.

As Republican Mark McKinnon writes in the “Daily Beast,” quoting Democratic strategist Paul Begala, “This is not a hope election, it’s a fear election. Since you don’t have your hero [Obama] on the ballot, make sure you have a villain.”

McKinnon goes on:
Begala recognizes there ain't much water left in the "hope" well, so the plan is to poison what's left. Begala understands that narrative architecture requires a villain. And every one of Obama’s transformative initiatives has had a designated villain—from greedy insurance companies, to big banks and fat cats on Wall Street.

The Democratic Congressional Campaign Committee is now digging for any dirt it can find on Republican candidates in close races to send to local reporters. And the Democratic National Committee has launched a Web site to solicit videos of Republican candidates’ gaffes filmed by partisan plants with cams in the crowds.

The Weekly Standard’s Fred Barnes, for one, worries that Democratic efforts to tag Republicans as the party of “no” might actually stick. He recommends Republicans stand behind Wisconsin Congressman Paul Ryan’s “Road Map,” his 87-page document that would give everyone a refundable tax credit to buy health insurance, allow individual investment accounts to be carved out of Social Security, reduce the six income tax rates to two (10% and 25%), and replace the corporate tax (35%) with a business consumption tax (8.5%). Ryan had the Congressional Budget Office (CBO) run the numbers in his plan. CBO concluded the plan would “make the Social Security and Medicare programs permanently solvent [and thereby] lift the growing debt burden on future generations.”

Barnes, however, points out why Republicans aren’t currently lining up behind Ryan’s “Road Map”: it would overhaul two popular programs, Social Security and Medicare, relying on individuals to make decisions now made by government.

Democrats are already attacking the “Road Map.” When Republicans in June gave Ryan a national platform to advance his program, House Speaker Pelosi’s press release pounced saying, “Republicans Make Key Advocate of Privatizing Social Security and Ending Medicare Their Spokesman on Budget.” When Democratic focus groups told swing voters Ryan would turn Medicare into “a voucher system .  .  . it has a massive impact,” according to Democratic strategist Robert Creamer, who added, “People like the Democratic program of Medicare.”

We would all like to be part of a nation where we debated, then moved to solve our two most intractable fiscal problems—Social Security and Medicare. Ryan is brave enough to get the ball rolling.

I’m afraid Republicans would be crazy to hand Democrats, using the “politics of fear,” an opportunity to demagogue either Medicare or Social Security. Better to live to fight another day.

Is the answer to Democrats’ “politics of fear” and their branding Republicans “the party of ‘no’” to respond in kind, not just talk about jobs, taxes, and deficits? No "hope"? Just meet fear with fear?

Possibly yes.

Friday, July 09, 2010

Piecemeal Immigration Reform

"the Washington establishment [is] so dismissive of modest legislation [because it] neither flatters the egos of wonks nor enhances the legacies (or electoral prospects) of Congressional members. And it ruins the strategy of holding common-sense reforms hostage to more controversial policy changes, a type of gamesmanship on which legislators rely."

-- Conor Friedersdof, Forbes, 7.08.10

Friedersdof is trying to explain why we always wrongly go for the big change when little steps are easier to pass, and much less likely to create future problems. And specifically, Friedersdof is attacking comprehensive immigration reform, exactly as I did earlier.

I liked many recommendations from the Council on Foreign Relations’ study, U.S. Immigration Policy, but thought it wrong to try to make all the changes at once. It’s more realistic to close the borders first, fix illegal workplace hiring, and push through changes that bring in more qualified immigrants right away, building a national consensus behind broader immigration reform before dealing with less-skilled (unskilled) workers and illegal immigrants.

Though he has the right idea, Friedersdof ‘s first steps are limited to:

➢ Expanding visa allotments for highly skilled immigrants, helping us join the global competition for talent that other industrialized countries long ago began in earnest.

➢ finishing a border fence whose half-existence steers unlawful border jumpers toward the most dangerous parts of the desert.

➢ passing the DREAM Act, extending lawful status to some children illegally brought to the United States.

➢ expelling the least desirable newcomers: illegal immigrants who commit violent crimes, felonies or other serious transgressions against the law.

Thursday, July 08, 2010

Obama’s "Toughest" 18 Months: Another Look

“liberals are determined to reinvigorate the reputation of government, to prove that only the state can get important things done. That is why the Gulf oil spill, for instance, is so vexatious for the White House and its liberal supporters. Why can't the government be more nimble and resourceful?”

--Jonah Goldberg, 7.8.10

Here and here, I was incredulous about Obama’s statement that he was going through the “toughest year and a half” any president had seen since the 1930s. The first time I refuted the statement, the Deepwater Horizon oil spill was 36 days old (the day before “top kill,” BP’s first effort to close the well), and the second time, the spill was 48 days old (BP was saying “top cap,” tried three days earlier, was capturing “the vast majority of the oil.")

Eight days after that second post, on day 56, Obama visited the Gulf and declared, "I am confident that we're going to be able to leave the Gulf Coast in better shape than it was before." The next day, day 57, he made his first-ever Oval Office address, called for a new, post-oil energy policy, and said, “The one approach I will not accept is inaction.”

Obama had nothing to do with the Gulf oil spill. It wasn’t his fault. He does, however, properly draw blame for not moving sooner against the spill, with everything at his disposal, to keep oil from hitting land. Government could have done more, and Jonah Goldberg, a conservative columnist, is right to suggest so.

Along with the president, I underestimated the seriousness of the Gulf oil spill, the greatest human-caused environmental disaster in U.S. history. And of course, the spill adds significantly to Obama’s woes during his first 18 months, mitigating some of what I said earlier. Obama’s first 18 months end July 20, spill day 92. It’s been a rough period indeed.

And accordingly, the president’s polls are down. Obama’s job approval rating has been below 47% for 5 straight days, 8 of the last 14. No president with a job approval rating below 47% has ever won re-election. During the past two weeks, Obama’s job disapproval ratings twice reached to his approval ratings, and for the last 3 days, Obama has been “upside down” (disapproval higher than approval). Currently, Obama’s at 46.1% approval, 48.0% disapproval.

Tuesday, July 06, 2010

Jobs: The Naked Truth

What if politics is about jobs, and you don’t know how to create them?

When you say something obvious, people go, “Duh.” Here goes anyway.

Politics is about jobs. People with jobs pay their mortgages and buy things. They support families. Roosevelt in the Depression understood the importance of jobs, putting people to work, getting them off the dole. Ever since, we treat the unemployment rate as the most important measure of economic health.

Amity Shlaes, in her readable, important book The Forgotten Man, turns rightside up the conventional wisdom about the Depression. Roosevelt’s “forgotten man” was the poor guy left out when business and its business-influenced friends in government made profit-oriented decisions that put average people out of work.

Shlaes maintains over 400 pages that the chief Depression headline wasn’t that the war (wartime spending) ended it, it was instead the tragedy of the Depression lasting eleven long years. It lasted, and lasted, and lasted because Roosevelt didn’t know how to create jobs. Roosevelt’s real “forgotten man” was the person left out when A and B pass a law to help X, and their law takes resources from A, B, and (mostly) C to help X (Shlaes, p. 12). “C” is the real “forgotten man.” And forgetting C is particularly dangerous when we need “C”’s talents and capital to create jobs.

Shlaes’ thesis is that the Depression is a history of constant government interference with the private sector that left business unable to plan for and invest in the future. And of course it’s private investment that creates jobs. So of course business didn’t create the jobs it could have, and so unemployment during 1940, the Depression’s eleventh year, averaged a today-staggering level of 14.5%.

If we understand unemployment in the Depression, we will understand better what’s happening in 2010. CNBC’s Larry Kudlow notes the household survey, which captures small owner-operated business employment, dropped 300,000 following a decline the previous month. Jobs are declining at the very place we look for jobs growth. Kudlow points out that Roosevelt-type pump-priming isn’t working today. Government transfer payments don't contribute to the output of goods and services. In the last three quarters, GDP growth has averaged 3.5%, with the federal contribution just 0.2%, while state and local government’s contribution is worse—a negative 0.3%.

Businesses create investment and jobs. . . In a watershed study, former Treasury economists Gary and Aldona Robbins showed tax cuts aimed at capital and business produced the biggest economic benefits. For . . . every tax-cut dollar on capital gains, $10.61 of new GDP is created. For every dollar of accelerated business-investment tax write-offs, $9 of new GDP is created. And for every dollar of corporate tax cuts, $2.76 of new GDP is created. [This] contrasts sharply with [White House] estimates [that for] every dollar of new government spending [we generate only] $1.50 of new GDP . . . And the White House analysis looks like a stretch. The International Monetary Fund has a model that says every additional dollar of government spending creates only $0.70 of new GDP. So you have to borrow a buck to get 70 cents back[!]

Businesses create investment and jobs.” Job creation for dummies.

Thursday, July 01, 2010


"When we look at Elena Kagan's resume, what we find is a woman who has spent much of her adult life working to advance the goals of the Democratic Party."

--Senate Minority Leader Mitch McConnell

Except that, I would say, “what we find is a party that has spent my entire adult life working to advance the goals of women.” The Democratic Party is the party of women, at least the women drawn to women’s issues—abortion, equal rights, education funding, health care, peace/anti-war. Unmarried women, college educated or not (and 60% of college graduates today are women), are a core Democratic constituency. Democrats, “their” party, advance women’s issues.

A Democratic woman, Hillary Clinton, was the party’s leading candidate for president until Obama upset her in Iowa early in 2008; still Clinton ended the primaries with 18.2 million total votes to Obama’s 18.0 million, and Obama wisely awarded her his top cabinet post—Secretary of State. A Democratic woman, Nancy Pelosi, heads one of Congress’s two houses.

Democratic women in the Senate (16) are 61.5% of the way to a theoretical goal of 26 seats—a majority of the majority party (women don’t want it all, just their rightful half). In the House, Democratic women (56) are 51.4% of the way to a theoretical goal of 109 seats; a majority of the House majority. And most significantly, Elena Kagan’s confirmation will make Democratic women, all unmarried (Ruth Bader Ginsburg’s husband just passed away), three of the Supreme Court’s liberal four.

When a liberal Democrat woman looks from her corner office out at the nation she helps run, what does she see? Government, at all levels is hers. The publications she reads, the news she watches, the culture she enjoys, the foundations she works with—all hers. Her party deserves power, for they are sincere about helping working class Americans through the unions Democrats support, they fought and won civil rights battles for blacks and Hispanics, they gave seniors security in their old age, they keep the powerful trial lawyers happy.

In all these endeavors, her party struggles against a common enemy—Republicans backed by the wealth of anti-government business, and the votes of less educated (a polite word) rightwing Christians. She knows these voting blocs theoretically, but personally, our female, college graduate leader is more likely to know her European peer than a working class American not providing her a service.

Helping Democrats retain power is figuratively, not literally of course, a matter of life and death. Democrats and the elite have worked together over four decades to build the world they currently enjoy. Until 1994, no matter who was in the White House, Democrats mostly controlled Congress as well as the Washington bureaucracy, and when Democrats lost Congress in 1994, Bill Clinton remained as president until 2001 (the era of television’s “West Wing,” the good president).

In 2001, Democrats lost the presidency even though Al Gore won the popular vote, but Democrats managed to win back the Senate when Vermont's Jim Jeffords left the GOP that June to vote with Democrats. In the broad sweep of history from 1955 onward, only from 2003 through 2006 did Republicans formally control both the White House and Congress, and George W. Bush was under withering attack most of those four years.

Now a time of true liberal Democratic ascendancy is drawing to a close (see my five “Six Months” posts). But the lessons of ownership tell us those struggling to hold onto what they have fight harder than those trying to take the possessions away. Republicans are in for a real war.

In Predictably Irrational: The Hidden Forces That Shape Our Decisions (2008), Dan Ariely discusses how we overvalue what we have, making irrational decisions about ownership. Ownership—as in liberals owning our political system through the Democratic party—leads us to value an object much more than if we do not own the object. Ariely calls this phenomenon the “endowment effect”—placing a higher value on property once we have possession. Ariely found, for example, that Duke students who received basketball tickets through a lottery valued them ten times more than the students who did not receive them.

Ariely gives three reasons for the “endowment effect”: 1) ownership is such a big part of our society that we focus on what we may lose rather than on what we may gain; 2) the connection we feel to what we own makes it difficult for us to dispose of them, and; 3) we assume others will see the transaction through our eyes. The "peculiarities" of ownership mean that the harder we work to get something, the more we feel it’s our own.

According to the Gallup poll, the liberals who feel such ownership over our political system today are but 20% of electorate. Conservatives, at 42%, hold their highest share since the “wave” election they won in 1994.