“In the Tank” = Unacceptable Flat Growth

On the economy, U.S. News & World Report’s Mort Zuckerman accentuates the negative. His fellow publisher, Rich Karlgaard at Forbes, is more upbeat. Karlgaard points out that in the Great Recession, the GDP in 2008, 2009 and (projected) 2010, was (and is), $14.3 trillion, $14.2 trillion and $14.6 trillion. That’s not growth, but it’s not recession either—it’s just staying flat. The problem is that with a growing population, America needs growth; Karlgaard says 3.3% a year, the post-World War II historical average. We can’t settle for Europe’s 2% annual growth, and certainly not for less than that.

But how do we sustain an annual GDP growth rate of 3.3%? Karlgaard quotes Carl Schramm, head of the Kauffman Foundation, who says:

The single most important contributor to a nation’s economic growth is the number of startups that grow to a billion dollars in revenue within 20 years.

The “X-factor” is startups that get big. And Schramm says the large U.S. economy needs to spawn around 100 eventual billion-dollar companies per year to keep annual GDP growth at 3.3%.

So how do we spawn that many “billion dollar babies”? Karlgaard says begin by removing the tax and regulatory barriers we place in the path of startups that have the potential to scale. And then, in words that are absolute music to my ears—every word as written, word for word—Karlgaard says:

any immigrant who graduates from a U.S. university should get a green card along with his/her diploma. So should any immigrant who starts a business that grows to more than 5 people on the payroll. Ambitious immigrants, disproportionately, create growth companies.

Yes! We can!

The U.S. Economy: In the Tank

Mort Zuckerman is editor-in chief of U.S. News & World Report. His political contributions go to Democrats and independents, not Republicans. Nevertheless, Zuckerman has done a good job of mixing together statistics that paint an appropriately bleak picture of where the U.S. economy stands today:

➢ 1 in every 10 American homeowners missed a mortgage payment in the first quarter, a record; roughly 1 in 6 Americans are either unemployed or underemployed or have left the labor force; over 4 in 10 unemployed Americans have been out of work for at least six months; 1 in 4 Americans with a mortgage have negative equity in their homes.

➢ the consumer confidence index remains near or below its lows of the previous four recessions. Household debt, which was about 30% in relation to disposable income in 1950 and went to 60% in 1970, is now 125%. And it might take as long as a decade to return to the earlier, safer range.

➢ Normally in two-plus years after a recession starts, nominal GDP is in double figures and real GDP is up by 7½%. Currently, nominal GDP is up slightly over 1% and real GDP is down from pre-recession peaks. By some key measures, this is the weakest recovery ever—and as for employment, housing, and personal income, there has been no recovery at all. [emphasis added]

The U.S. today. “No recovery.”

The People’s Chamber

our politics seems so tough right now and facts and science and argument does not seem to be winning the day all the time . . . because we're hardwired not to always think clearly when we're scared.

--President Obama, 10.16.10

Micky Kaus, in Newsweek, notes how close Obama’s words are to his most disastrous comment from the 2008 campaign, when he said Pennsylvanians “cling to guns and God” out of fear. Kaus rightly makes the comparison—Obama in two elections warning to watch out for voters who are afraid, and twice slighting voters in the process. But what gets my attention is Obama’s pronouncement that “facts and science and argument does not seem to be winning.”

[Picture: Democratic House Speaker John Nance Garner (1931-33), later (1933-41) Franklin Roosevelt’s vice president.] Since 1930, a period of 80 (“four score”) years, the Democratic thinking party, the one with the brains and with “facts and science and argument” on its side, has not only dominated the intellectual life of America, it has with few exceptions controlled the U.S. House of Representatives, “the people’s chamber“.

Even when our intellectuals/Democratic Party failed to control the White House or the Senate, it was comforting for them to know the House remained Democratic. That meant the people symbolically endorsed leadership by their betters, Democrats steeped in “facts and science and argument.” In 1946, when post-war hyperinflation and related strikes for higher wages swept the country, and in 1952, when the nation elected Eisenhower and Republicans after Democrats gave us the Korean War and (again) inflation, the House did pass briefly out of Democratic hands. But both times, Democrats were back in control within two years.

The only major break in Democratic domination of the “people’s chamber” occurred from 1994 to 2006. Republicans argued that as liberal intellectuals gained full control over the Democratic Party, the people responded by voting Republican six successive times. The national elite, led by the media, went all-out to disprove any assertion that the people had left Democrats behind; they saw loss of the House as a temporary aberration. ABC anchor Peter Jennings said of the 1994 GOP take-over of Congress, “The voters had a temper tantrum last week... Parenting and governing don't have to be dirty words: the nation can't be run by an angry two-year-old."

As I have written, after the 1994 election and the Republican Speaker Newt Gingrich-led shut-down of government in December 1995, the media dropped their “plague on both your houses” approach to persons in power. Media worked to change the landscape back to "normal" Democratic control by successively demonizing Republicans Gingrich, Impeachment Independent Counsel Ken Starr, and especially President George W. Bush over the next decade, succeeding when Democrats recaptured Congress in 2006. Democrats believe that in the aftermath of 9.11, Republicans delayed the rightful restoration of power to the party of “facts and science and argument” by demagoging “the war on terror” in both the 2002 and 2004 elections.

But underneath, the liberal/media elite do worry the national majority may no longer be with Democrats. Look at how Time's Joe Klein riles against the “classic American myth, perpetrated by Hollywood . . .with 'Mr. Smith Goes to Washington'", of the “inspired amateur” who “actually read[s] the bills he was about to vote on, then mak[es] up his own mind.” To Klein, Jimmy Stewart ("Mr. Smith") is “a lovely fantasy.” The reality is Republican senate candidate Christine O'Donnell of Delaware:

attractive, to some, because she doesn't know anything. She couldn't . . . ever be confused with a member of the elites; there is no way she could be confused with an above average high school student. Her ignorance. . . makes her authentic-- the holy grail of latter-day American politics: she's a real person, not like those phony politicians. In that sense, she—[along] with other Tea Party know-nothings--follow in the wake of our leading exemplar of ignorant authenticity, Sarah Palin.

Klein's article drips with condescension. We are witnessing the masses taking over from their betters, and he doesn't like it. Klein's rejects majority rule replacing rule by a superior minority, the same elite rule justification for holding power we earlier found "Slate's" Jacob Weisberg defending. To Klein,"There is something profoundly diseased about a society that idolizes its ignoramuses and disdains its experts. It is a society that no longer takes itself seriously."

More insults aimed at both Republicans and the population supporting them.

Going into this election, the question before us seems clear. Are we better off when big government, controlled by an elite blessed with “facts and science and argument,” gathers our resources and makes the decisions for the rest of us that create or don't create jobs? The answer seems equally clear: "No." Time for the people to reclaim their chamber.

Sun Setting on Union Power?

Michelle Rhee is out as Washington D.C. school superintendent. I’ve had real trouble calling the twists and turns of Rhee’s tenure; this one I got right. And no mistaking the reason Rhee’s out—the teachers’ union won its struggle with Rhee and her boss, D.C. Mayor Adrian Fenty, who lost his re-election bid.

But is the D.C. teachers’ union victory Pyrrhic? Are people finally waking up to public sector union power? Charles Krauthammer, speaking on "Fox News," thinks so. He said of Rhee's forced resignation:

the major issue that is coming up in the next year or two, the next decade is going to be the power, the reach, the benefits that the public sector unions have, including the teachers union. And when people learn about that, I think it’s going to be a major issue of our time. And its coming and [Michelle Rhee's forced departure] is one example of it, the power it has and how it hurts the country.

David Brooks in the New York Times writes about “demosclerosis,” governments draining money from productive uses such as building tunnels and supporting education to fund unproductive ones instead, such as New Jersey’s benefits packages for state employees 41% more expensive than those of the average Fortune 500 company, with costs rising by 16% a year, New York City’s supporting 10,000 former cops who have retired before age 50, and California’s state cops receiving 90% of their salaries when they retire at 50. States face unfunded pension obligations that, if counted accurately, amount to $2 trillion — or $87,000 per plan participant.

Brooks says governments can’t promote prosperity or help schools adequately because of union self-indulgence. While private sector managers have to compete in the marketplace, Brooks writes, government managers possess a monopoly on their services and have little incentive to resist union demands that make them unpopular. Elected leaders raise state employee salaries in fat years and jack up future pension benefits in the lean ones. And public sector unions even buy their benefits directly: between 1989 ad 2004, the American Federation of State, County and Municipal Employees, the biggest spender in American politics, gave $40 million to federal candidates.

Brooks calls the end result “sclerotic government.” It's the Democratic Party’s “epic failure.” The Democratic Party “has become captured by the unions. Liberal activism has become paralyzed by its own special interests.” Therefore, we no longer have government “that is nimble, tough-minded and effective.”

Still, it’s possible this all might change. The Washington Post’s Steven Pearlstein describes a remarkable contract worked out between government-owned General Motors and its close ally, the United Auto Workers, that has saved 1,550 jobs in GM’s Orion plant that would have otherwise gone to South Korea to build the new GM sub-compact. The UAW has agreed to a two-tiered contract with its 60% most senior employees receiving $28 an hour, but the bottom 40% earning only $14 an hour. That enables GM to build the car in the U.S., employing American workers, producing a product that can be priced competitively. The alternative: lose your job.

And that’s exactly what’s happening at an Indianapolis GM stamping plant. It’s slated for closure next year after workers rejected a similar two-tier pay settlement, out of fear the idea would spread throughout the industry (which will in fact happen). So the Indianapolis workers lose their jobs! As Pearlstein says, “a better alternative to layoffs is to cut everyone's hours and pay and spread the pain more widely.” Instead of high unemployment, we need “creative new wage structures that will allow us to better spread the burden of getting the economy back into balance.”

Business leads the way. Government needs to follow. Employees should work for less pay and smaller benefits, giving government the resources it needs to do the work that matters most.

It’s way past high noon for union power in America. With union givebacks, we can help business and government work better while at the same time saving jobs.

Rebirth of American Exceptionalism

Chinese friends chide me for overidealizing China. I tell them: “Guilty as charged.” . .China. . . has regular rotations of power at the top and a strong record of promoting on merit, so the average senior official is quite competent. Listening to Prime Minister Wen Jiabao of China tick off growth statistics in his speech here had the feel of a soulless corporate earnings report. Yet he has detailed plans for his people’s betterment, from universities to high-speed rail, and he’s delivering on them.

--Thomas Friedman, 9.21.10

In a nutshell, Friedman admires China because its meritocracy has nearly unchecked power. America by contrast (here Friedman quotes China expert Orville Schell) finds itself “so unable to get things done,” missing "fearfully . . . that ‘can-do,’ ‘get-it-done,’ ‘everyone-pull-together,’ ‘whatever-it-takes’ attitude that built our highways, dams and put a man on the moon. . .hallmarks of our childhood culture.” Sigh. Big Government programs that worked, childhood days of “The Blue Model” Big Government-Big Business-Big Labor, everything (?) working, Democrats in charge.

Democrats like Friedman and Schell are implicitly admitting that Big Government under Obama hasn’t worked, though Friedman blames not the President, but “our poll-driven, toxically partisan, cable-TV-addicted, money-corrupted political class.” He wants more meritocracy, not less. Friedman wants the China Model, a nation led by the exam-tested best and brightest, the modern version of China’s imperial bureaucracy, its scholar gentry. He wants what we have under Obama, only more.

Well, it’s not to be. Americans are on the verge of rejecting the American ruling class, and the big government-run economy upon which our rulers have placed their faith. Politics is about power. Republicans say wise use of power maintains a framework for business to succeed, because business and only business creates jobs, and because jobs are crucial if individuals and families are to enjoy “life, liberty, and the pursuit of happiness.” The ruling class wants power in the hands of our national elite, our best and brightest, who will create for us the jobs we need to enjoy happiness.

But the elite has had its two years and the elite has failed. We are now more certain than we were when Reagan became president in 1980, and more certain than when Republicans captured Congress in 1994, that social evolution leads a society away from top-down, ever bigger institutions toward an economy where government steps back and allows the creative genius of millions of Americans, many who score poorly on written examinations but who learn from experience, to build jobs from the bottom up. That’s what democracy is about—treating everybody as equally capable of succeeding, allowing those who both work harder and who are luckier to succeed, and benefiting from the jobs their success creates.

Democracy and free enterprise go together. Each relies on the innate worth of every individual. Neither blesses rule by a superior elite. We are not China. A level playing field, open competition, and the rewards of success built the greatest nation on earth. Pulling government back, pushing our underperforming elite out of the way, these two power shifts will once more allow America to get back to greatness, greatness that will benefit the world’s peoples wherever they live.

Government Party at the Ramparts

those. . . who believed that government could solve intransigent problems, are not only disappointed but dispirited. Obama's faithful never believed in the dynamism of the private sector, only in its corruption. They never trusted Bush except to do favors for Halliburton. . . Now even that audience is waking up to . . . a world where government cannot create wealth, but only consume it.

--Hugh Hewitt, Washington Examiner, 9.26.10

Politics is who gets what, when, and how.

--Harold Lasswell (1935)

What Jared Diamond bluntly calls a “kleptocracy,” government gets in the way of people going about their business, best understood as a farm family raising the crops that will feed, house, and clothe its members. Government, performing no farm work of its own, steals from farmers to pay for its existence.

Lasswell’s classic definition of politics needs another look. Are we happy to have “politics” (government) in the picture? Do we want someone else telling us “who gets what, when, and how”? No, especially when it comes to decisions best made by a free market. We need a working free market to create and keep jobs, and nothing’s more important to the future of American families than jobs.

Get politics out of the way! Let free markets work!

Of course, government should, as the Preamble to our constitution says, “establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty.” It has a big role in providing the infrastructure—physical and social, including education—needed for growth and prosperity.

But the principal lesson of the 20th Century is that when it comes to running the economy, hand the ball to the private sector, not to government. Government screws it up, every time.

Given what happened in the former Soviet Union, in Maoist China, in Eastern Europe, in Vietnam before 1987, in Cuba, in the U.K. before Thatcher and Blair, and in many other social-democratic countries including Australia, New Zealand, Germany, France, Brazil, and India, as well as in the U.S. under Jimmy Carter, why is the U.S. once again reaching for Big Government? Don’t we ever learn?

“We” might. “They” don’t, or at least “they” don’t give up. “They” are the people who benefit from a large and growing government, even if its growth comes at the expense of prosperity for all of us, including their children. And let there be no confusion on this point: “They” is the Democratic Party. Democrats and Big Government are by now almost a complete identity. If you like government, you are a Democrat. If not, no.

Here are the folks who identify with the Democratic/Government party, and why:

The Ruling Class: It used to be Republican, rich, land-based, the American aristocracy. Being “Republican” was a way to identify with those who had the wealth and the (derivative) power. But what Arthur Schlesinger, Jr. called “the Old Order“ failed us in the Great Depression. That failure led to the New Deal-Fair Deal-New Frontier-Great Society era (1933-68), what Walter Russell Mead calls “the Blue Model”--big government, big business, and big labor working together under Democratic leadership, with government in charge; big business and Republicans following as junior partners. Vietnam blew up “the Blue Model,” creating enough anarchy and chaos to have us looking to Uncle Walter Cronkite and the national media for guidance. Media power helped encourage the high-SAT score, liberal elite take-over of our country under a reformed Democratic Party, the champion of women, minorities, and others who benefit from government power. When the “Old Order” lost its 1960s battle to place unqualified alumni children into Harvard, Princeton, and Berkeley, it foreshadowed the ruling class transition from money to credentials. Intellectual take-over of the rest of America’s elite institutions—the media, government, non-profits, arts and entertainment, finance, and big business (but not the military or small business)—then followed. As with all ruling classes everywhere, the American liberal elite is obsessed with protecting its existing power.

Government Workers: Government unions are such a large share of the Democratic Party it’s impossible to separate them. And Democrats have gone so far toward rewarding government workers at the expense of the rest of us that state and local government workers earn 44% more than do private-sector workers, and federal government employee compensation more than doubles that of private-sector workers. In many states including California, pension rewards for government work are so high they threaten to bankrupt the rest of government.

Transfer Payment Beneficiaries: Besides those working for the government, additional millions benefit from government transfer payments. By now (the share grows annually), 18% of personal income comes from government benefits, 10% from government wages, and only 42% from private sector wages.

Blacks, Other Minorities, Unmarried Women: These are the Democratic Party’s core constituencies. Republicans pursued a “Southern Strategy” that won them the White House for all but four years between 1968 and 1992. Whites unhappy with civil rights or affirmative action knew which party listened to their concerns—Republicans—and a white majority voted accordingly. The strategy has cost Republicans; they have trouble reaching the moderate to conservative minority voters alienated by ethnicity from Republicans. Unmarried women, who likewise welcomed government protection against the male-dominated “Old Order” that prevailed under Republicans, themselves vote heavily Democratic. Unmarried women not only value the government programs Democrats have enacted on their behalf, they also appreciate that Democrats defend a woman’s right to choose.

The Media: Why are the media so favorable to government-based, as opposed to private sector-based solutions, even when the issue is job creation? First, government is the vehicle through which any media outlet works. The media see themselves as the people's voice, and government as the people’s servant. The media therefore have no problem with government regulating, taxing, and controlling business on behalf of the people. Second, since they ended the Vietnam War and overthrew two presidents (Johnson because of Vietnam, Nixon through Watergate) in 1968-74, the media have dictated the national agenda, as executed by Democrats through government. Democrats appreciate all the media have done for the party; both sides work well together.

Academia: Like the media, academia wants to do good for the people, and that logically involves influencing government to enact new programs that help people. Academics believe in social justice, with government the instrument for achieving justice. The enemy would be private sector businesses pursuing profit at the people’s expense. So academics work for Democrats and against Republicans for a better society. Also, Democrats are more inclined to fund academic research, and to raise taxes to do so.

Non-profits: The profile of a non-profit worker looks much like that of an academic: successful in school, seeking influence through words and data, seeing government as the ultimate target, with the objective of launching or expanding a government program that will benefit the public. Democrats, the party of government, understand all this, and Republicans tend not to. Also, government funds much of non-profit work.

Arts and Entertainment: Though part of the private sector, artists and entertainers generally feel alienated from the world of business and profits. They want to do good on behalf of the people. As with the media, artists and entertainers believe working with Democrats in government is the best way to help people. Artists and entertainers aren’t necessarily graduates of top universities or sometimes any university, although high-tech arts and entertainment is brain work. Entertainers more classically rise to the top through raw talent, measured by wealth. Nice then that when they arrive, they find an elite sharing their pro-government Democratic ideology. (Starving artists naturally have even less problem identifying with government, whose programs aid the temporarily unemployed.)

Trial Lawyers: The constitution guarantees persons a fair trial with an adequate defense, and the “plaintiffs bar,” working through the large share of elected officials who are lawyers and through a Democratic Party heavily funded by trial lawyers, has written a sea of laws favorable to large settlements that make lawyers rich at the expense of legitimate business and most of the law-abiding public, who pay higher insurance rates and prices as a result. Trial lawyers sometimes work with the media, arts and entertainment, and government to take down our worst corporations.

These millions make up the Government Party. When it comes time to downsize government, the government party armies will be expected to fight back hard, very hard.

Shocking Revelation: Liberal Admits to Liberal Elite Rule

Jacob Weisberg, in his “Slate” article “Elitist Nonsense,” provides amazing insight into how the elite sees itself. No surprise, Weisberg begins his discussion of America’s elite by reaching for sociologist C. Wright Mills’ (The Power Elite, 1956) classical definition: a “shared identity based on economic interests.” Weisberg first sets an elite based on money against how Republicans define elite, whom Weisberg mockingly says give it

connotations of education, geography, ideology, taste, and lifestyle—such that a millionaire investment banker who works for Goldman Sachs, went to Harvard, and reads the New York Times is an elitist but a billionaire CEO who grew up in Houston, went to a state university, and contributes to Republicans, is not.

Weisberg is amused by how John McCain handled NBC anchor Brian Williams’ 2008 campaign question, "Who is a member of the elite?" McCain replied, "I know where a lot of them live—in our nation's capital and New York City—the ones [Palin] never went to a cocktail party with in Georgetown—who think that they can dictate what they believe to America rather than let Americans decide for themselves."

Weisberg adds, “Thus did the son and grandson of admirals, a millionaire who couldn't remember how many houses he owned, accuse his mixed-race opponent, raised by a single-mother and only a few years past paying off his student loans, of being the real elite candidate in the campaign.”

Weisberg thinks it’s funny for a rich man to think he’s not in the elite. But to me, McCain is talking about today’s “power elite”, a group at the top who believe they have the right to rule over the rest of us. When McCain picked Sarah Palin as his vice president candidate, he said pretty clearly he didn’t buy the “elite should rule” idea. Maybe that helps explain why the elite then went crazy.

Looking further at McCain, Palin, and other Republican leaders, Weisberg refines his version of what Republicans call the elite:

➢ social snobbery. . . not based on family, ethnicity, or wealth, but rather on the status that in contemporary American society is largely conferred by academic institutions.

➢ someone who thinks the opinion of a minority should sometimes prevail over the opinion of a majority.

Of course, a Republican would say America’s elite doesn’t think ruling class opinion should prevail over the majority only “sometimes”—“sometimes” is for sure Weisberg’s very own modifier. Erase “sometimes,” and Weisberg is pretty much onto the Republican definition—“elite”: a well-credentialed group at the top reaching across government, academia, the media, non-profits, arts, entertainment, business and finance that believes it should rule because it is certifiably better than the rest of us.

Weisberg concedes the Republican definition of elite packs a political punch, admitting that when liberals act superior, that cuts against the American ideal of social equality. And Weisberg, by flatly describing America as “a meritocratic society,” makes the biggest concession of all to the Republican definition of elite—what else is our academically-credentialed elite but a “meritocracy”? Weisberg understands what’s wrong with an elite based on academics—it brings “an even worse sting than under an aristocratic or hereditary one, because those who are less successful can't blame outcomes on the arbitrariness of the system.”

In fact as his argument rolls along, Weisberg grows increasingly comfortable with being part of the elite Republicans oppose. He quotes ultra-Tory Edmund Burke’s defense of elite rule, his famous principle that elected legislators owe their constituents their best judgments; they cannot just be conduits for majority opinion. In the same vein, Weisberg defends expert rule and attacks popular referenda (“I'd rather have a nuclear-energy policy set by Nobel Laureate Steven Chu of Berkeley than by a plebiscite.” [emphasis added]). By the end, Weisberg writes he actually has no “problem” with the Republican definition of elite!!!

So what is Weisberg’s “problem”? He believes Republicans are just as willing as liberals to “adopt superior stances” or “tell people how to live their lives.” They insist “that gay people not be married, or that some go without health insurance, or that gas be lightly taxed.”

Is that it, really? It seems to me a majority of Americans favor the policies to which Weisberg and his elite object, and in a democracy, where the majority rules, that’s a pretty important difference.

In sum, Weisberg tells us:

Democrats are the party of the elite (and we’re lucky to have them).

Republicans are the party of the majority, unwashed as it may be.

An important admission indeed.

Writers to America: “You folks are ill!”

Sometime long ago, a writer by the side of Walden Pond decided that middle-class Americans may seem happy and successful on the outside, but deep down they are leading lives of quiet desperation. This message caught on (it’s flattering to writers and other dissidents), and it became the basis of nearly every depiction of small-town and suburban America since.

--David Brooks, 9.21.10

Brooks’ comment comes from his informal review of Jonathan Franzen’s Freedom, a book that drew much attention when President Obama made it part of his Martha’s Vineyard summer reading this past August (it’s now #1 on the New York Times’ fiction bestseller list). Is it fair to say multi-book author Obama may share a perspective on the American middle class that parallels that of writer Franzen and Walden Pond’s Henry David Thoreau? He did say of small town people in Pennsylvania and the Midwest (the setting for Franzen’s Freedom), “they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”

I’m with Brooks’ implicit message; writers don’t “get” middle class love of America and its freedom. The writers would paraphrase Tolstoy—who famously opened Anna Karenina with the words, “Happy families are all alike; every unhappy family is unhappy in its own way.”— by arguing, “Seemingly happy middle class Americans are outwardly boring; inwardly quietly desperate.” Writers can’t write happy American middle class. So that fact sets writers against the people who make America go, but don’t have time to write. That means folks who read fiction about our middle class aren’t gaining the understanding they should about the people who decide American elections and who thereby rule.

Democrats divided by race, class, or both?

Is there a civil war inside the Democratic Party? Michael Barone thinks so. He writes the battle pits the “gentry” (the liberal elite, the ruling class) against the party’s union core, and the unions seem to be on top:

the most stark demonstration of unions' power came in the District of Columbia, where Mayor Adrian Fenty was defeated [following] his appointment of Michelle Rhee as school superintendent. Rhee’s reforms have produced higher test scores, stable rather than declining enrollment, a teacher-evaluation system that has resulted in dismissals of dozens of incompetents and a union contract giving administrators greater flexibility. . . [While g]entry liberals and public-employee unions were allies in the Obama campaign in 2008. . .now they're in a civil war in city and state politics. This raises the question of whether the Democratic Party favors public-employee unions that want more money and less accountability or gentry liberals and others who care about the quality of public services. Right now, the unions are winning.

Thomas Sowell, also writing about D.C. Mayor Adrian Fenty’s defeat, saw the election not as a struggle between liberals and unions, but instead between white and black:

[Fenty’s] serious efforts to reform the schools through an Asian school superintendent and to lower crime through a white woman police chief brought about his rejection by D.C.’s black voters, even as student test scores rose and the murder rate declined. Fenty, who is black himself, also suffered for not using enough black contractors, and because most of the teachers fired were black.

Sowell, himself also black, asks:

How did we reach the point where black voters put racial patronage and racial symbolism above the education of their children and the safety of everyone? . . One key factor was the creation, back in the 1960s, of a whole government-supported industry of race hustling [playing the race card].

President Lyndon Johnson's "war on poverty"-- a war that we have lost, by the way-- bankrolled all kinds of local "leaders" and organizations with the taxpayers' money, in the name of community "participation" in shaping the policies of government.

These "leaders" and community activists have had every reason to hype racial resentments and to make issues "us" against "them." . . ACORN, Jesse Jackson and other community activists have been able to transfer billions of dollars from banks to their own organizations' causes, with the aid of the federal government[‘s] Community Reinvestment Act and its sequels. Racial anger and racial resentments are the fuel that keeps this lucrative racket going.

The liberal elite use class and they use race to maintain their position—at the expense of Republicans—atop the political pyramid. How ironic, if both class and race now bite back.

Who knew? They really do rule.

President Obama is the smart academic, just as are those who love him most. Look at David Paul Kuhn’s summary of where Obama’s money comes from:

Obama's campaign raised a record $745 million. . . about a quarter of Obama's fundraising came from people who contributed less than $200, the same share as George W. Bush four years earlier, according to the nonpartisan Campaign Finance Institute. Donors who contributed at least $1,000 filled nearly half of Obama's coffer. And the five companies whose employees donated the most to Obama were respectively: University of California, Goldman Sachs, Harvard University, Microsoft Corp and Google Inc. [emphasis added]

Such a tight, tiny, high-powered circle: University of California; Harvard; Barack Obama, J.D., Harvard Law (1991); Goldman Sachs CEO Lloyd Blankfin, Harvard (1975), J.D., Harvard Law (1978); Microsoft founder Bill Gates, Harvard (x1977); Google CEO Eric Schmidt, Ph.D., University of California (1982).

Recall it, the excitement! A philosopher-king, one of their own, ruling the world’s most powerful nation. The dream did come true in 2008.

The Race Card

Gerard Alexander is an associate professor of politics at the University of Virginia and a visiting scholar at the American Enterprise Institute. He’s upset that Democrats continually skewer Republicans as racists:

There is power in the accusation of racism against conservatives, one that liberals understand well. In an April 2008 post on Journolist, a private online community for liberal journalists, academics and activists, one writer proposed a way to distract conservatives from the campaign controversy surrounding the Rev. Jeremiah Wright, Barack Obama's pastor. "If the right forces us all to either defend Wright or tear him down, no matter what we choose, we lose the game they've put upon us," Spencer Ackerman wrote. "Instead, take one of them -- Fred Barnes, Karl Rove, who cares -- and call them racists."

America now tilts conservatives against not just blacks but also Hispanics, Muslims and anyone else outside a nostalgic and monochromatic description of the American way of life. The narrative usually begins with Barry Goldwater opposing provisions of the 1964 Civil Rights Act and with Richard Nixon scheming to win the presidency through a "Southern strategy" -- appealing to the racial prejudice of working-class whites in the South . . .As Dan Carter, George Wallace's biographer, put it, "The Wallace music played on" in "Barry Goldwater's vote against the Civil Rights Bill of 1964, in Richard Nixon's subtle manipulation of the busing issue, in Ronald Reagan's genial demolition of affirmative action, in George Bush's use of the Willie Horton ads, and in Newt Gingrich's demonization of welfare mothers."

To Alexander, such a reading of the conservative movement relies on these false assumptions: 1) Republicans depended on white Southerners to become competitive in the 1960s; 2) Republican presidents from Nixon forward gave bigoted voters the policies they wanted; 3) the modern conservative policy agenda is racially motivated, and; 4) conservative positions on controversies such as the Arizona law asking police to check for proof of legal status and opposition to the proposed Ground Zero mosque are new forms of white-heartland bigotry.

Alexander presents the issue as if pandering to white bigots wasn’t integral to the Republicans’ “Southern strategy,” when it most certainly was. Democrats were on the short end of this strategy for decades, breaking a 40-year Republican domination of the White House from 1968 to 2008 only when they nominated Southern candidates—Jimmy Carter in 1976 and Bill Clinton in 1992 and 1996. With Obama in 2008, they were finally able to beat Republicans at their own game, assembling a majority coalition of minorities, unmarried women, white liberals, and young people who hate white racism enough to play the race card with glee, and power a black Northern liberal Democrat into the White House.

The truth is race today helps the Democrats, not the Republicans. The Race Card is a Democratic play, and it works.

Here’s how: 1) playing the race card helps hold all minorities, even those doing well under the present system, close to Democrats; 2) unmarried women who suffered (or whose mothers suffered) during the male-dominated Republican era have great sympathy for female and male non-whites; 3) white liberals and young, college-educated whites gain moral strength by separating themselves from white bigots (Republicans), and standing alongside their brothers and sisters of color.

To me, politics based on race was wrong when Republicans practiced it, and it’s wrong in its current, Democratic version. But that’s because my vision of merit-based government favors a decentralized economy with millions of little decision-makers, with government only providing the framework for them to succeed. Government based on the race card is by contrast big, growing, now gigantic, supposedly benevolently and constantly acting on behalf of otherwise-discriminated-against minorities.

The trouble with race is that it gets in the way of merit, whether it’s used to push minorities down, or to pull them up. The trouble with government is that it doesn’t honor merit. If it did, it would get out of the way of those who create jobs and wealth. It would stop playing the race card.

Government + race = bad outcome.

Recovery on the way?

Forbes columnist Joel Kotkin has found some pretty convincing evidence that housing recovery is America’s future. Look at the chart below, drawn from Kotkin’s article:
Housing is so much more affordable now that once the jobs return, an upsurge in home sales is sure to follow.

Kotkin, who from his Orange County California perch is more attuned to suburban and immigrant trends than many, also believes that whatever planners say, the people want single family homes such as those found in Los Angeles, Riverside, and Las Vegas. Kotkin writes:

Already a majority of immigrants live in suburbia, up from 40% in the 1970s. They are attracted in many cases by both jobs and the opportunity to buy a single-family home. For an immigrant from Mumbai, Hong Kong or Mexico City, the “American dream” is rarely living in high density surrounded by concrete; if they wanted that, they could have stayed home.

Of course, it’s all about when that recovery will occur. Washington Post columnist Robert Samuelson has a view on why consumer spending is returning so slowly. (Samuelson seems to believe the relationship between jobs and consumer spending is cart-horse, not chicken-egg; in other words, consumers first spend, then consumer spending creates jobs.) The reason spending lags, Samuelson asserts, is that consumers spent down their wealth too far, and now must save to recover. In 2006, their savings rate had dropped to 2%. They were over-extended, too far in debt. Now they are recovering, back up to 6% savings.

That could be great news, if their savings target is 6%, and consumers have now reached that target. Savings stashed away, consumers can then begin spending in earnest again. And debt reduction works the same way—first reduce debt, then resume spending. The good news here, Samuelson says, is that household debt has already dropped $800 billion from its peak of $11.7 trillion, while debt service — the share of income going to interest and principal payment — has decreased from almost 14% in early 2008 to 12.5%, its lowest level since 2000.

Good news, for sure. But what if people want to save even more, or reduce their debt payments even further, before resuming spending?

Unhappy with the news? Less likely to vote.

Michael Barone has found that when your side does poorly, you like the news less. And you’re less likely to vote.

Here’s what Barone says:

Enthusiasm is not aroused simply by a stirring speech. It’s aroused by seeing your ideas and policies work out the way you expected. Or. . .by seeing your political adversaries’ ideas and policies fail to work out the way they expected.

Democrats in the past 20 months have seen Barack Obama fail to produce the hope and change they expected. [No] withdrawal from Iraq and Afghanistan. . . shuttering Guantanamo. . . end[ing] the ban on openly gay men and women serving in the military. . . Meanwhile, the vast increases in government spending . . . have[n’t] produce[d] economic recovery, and the health-care bill [hasn’t generated] the widespread gratitude that Obama said we should expect.

So, [Democrats have stopped paying attention]. . .the Pew Research Center for the People and the Press. . . found that in 2008, 67% of liberal Democrats said they enjoyed the news a lot, while just 45% say so today. In contrast, 57% of conservative Republicans say they enjoy the news a lot today.

Three Big Elections

Yesterday proved to be a big day for people who watch politics. In Delaware, when tea party-backed Christine O’Donnell [picture] defeated Rep. Mike Castle for the GOP Senate nomination, Democrats effectively captured a senate seat they were supposed to lose in November. Now with 6 seats rated toss-ups, Democrats lead Republicans 49-45 in the RealClearPolitics count, meaning if one more seat goes Democratic, with Vice President Biden’s deciding vote Democrats will control the next Senate.

In nearby Washington, D.C., Mayor Adrian Fenty lost his bid for re-election. That means School Superintendent Michelle Rhee [picture], whom Fenty hired and fully supported, will be gone by the end of the year—terrible news for those who believe in school reform.

Earlier in the day in Tokyo, Japanese Prime Minister Naoto Kan [picture] survived a bitter challenge to his leadership from political heavyweight Ichiro Ozawa, who was trying to win the poll for the ruling Democratic Party of Japan’s presidency. Had the corrupt Ozawa won, he would have become prime minister, setting back a year’s worth of Japanese reform efforts.

Three elections; three big stories.

In Delaware, according to "RealClearPolitics’" Sean Trende, “O’Donnell really can’t win.” Why would the Tea Party and Sarah Palin work to take away a Republican senate seat (GOP loser Castle was favored to win in November), and help hand control of the Senate to Democrats? It’s like 1964, when Republicans’ suicidal nomination of Barry Goldwater handed Democrats a sweeping triumph that year. Except that 1964, the year after President Kennedy’s assassination, was a Democratic year anyway. And according to Trende, Castle was actually no shoe-in, perhaps especially if conservatives had stayed away following the bitter O’Donnell-Castle primary.

Before voters rejected Obama’s stimulus, ObamaCare, and Obama’s huge federal deficits, they were upset about the $800 billion Wall Street bailout engineered by Bush, Democrats, and Republicans in Congress in October 2008. Castle is yet another defeated Republican primary candidate who, as Delaware’s congressman, voted for the bailout.

In Washington D.C., I read the tea leaves wrong, saying that since Mayor Fenty backed Michelle Rhee’s firing of 241 low-performing teachers, he must have thought the firings would “work for him politically.” Today’s Washington Post analysis of what went wrong during Fenty’s re-election campaign lists Rhee’s teacher firings as one of the factors working against him.

In Tokyo, Ozawa’s even trying to unseat Kan at this early stage in the Prime Minister’s tenure (Kan just took over in June) shows how deeply divided is Japan’s leading party. Kan is scandal-free, in contrast to Ozawa and Kan’s predecessor, Yukio Hatoyama, both forced out of power and tainted by scandals that saw three aides indicted. But Ozawa is a political genius, the man who remade Japanese politics, and the one people believe can best engineer future changes. In order to survive, Kan probably has to win over Ozawa’s supporters by undertaking the very reforms Ozawa himself had promised to deliver.

Experts,”Yes,” Government-controlled Experts, “No.”

Arnold Kling writes in the Cato Policy Report about why experts have failed to fix America’s economy. First Kling makes an important point—one this blog needs to underscore and repeat—“decentralized knowledge is becoming increasingly important.” Kling adds that “trained professionals really do have superior knowledge in their areas of expertise, and it is dangerous to pretend otherwise.”

Kling believes the rise of expertise “makes centralized power increasingly anomalous,” because power overwhelms expertise. Key Kling points:

➢ linking expertise to power . . . diminishes the diversity and competitive pressure faced by the experts. . . The power of government experts is concentrated and unchecked.

➢ private experts have to respect the dignity of the individual, because the individual has the freedom to ignore the expert. . . knowledge that is important in the economy is dispersed. Consumers understand their own wants and business managers understand their technological opportunities and constraints to a greater degree than they can articulate and to a far greater degree than experts can understand and absorb.

➢ When knowledge is dispersed but power is concentrated, [we have a] knowledge-power discrepancy. . . The authority of the state gives government experts a dangerous level of power. And the absence of market discipline gives any errors that these experts make an opportunity to accumulate and compound almost without limit. In recent decades, this knowledge-power discrepancy has gotten worse. Knowledge has grown more dispersed, while government power has become more concentrated.

Kling supplies several examples of how government power overwhelms expertise, to the detriment of all. They include government's job creation failure, the health care reform mess, botched efforts to create green industries, over-regulation of the financial industry, and the post-9/11 ineffective ballooning of our national intelligence apparatus. Kling concludes:

the way to address the knowledge-power discrepancy is to reduce the concentration of power. We should . . . resist the temptation to give power to government experts, and instead allow experts in business and nonprofit institutions to grope toward solutions to problems.

We need to fight government’s natural inclination to use expertise to advance its own political objectives, and instead send decisionmaking back to the private sector, where experts more naturally compete for the ideas that, in the eyes of consumers (us}, work best.

9/12

The goal of any organized terrorist attack is to goad a vastly more powerful enemy into an excessive response. And over the past nine years, the United States has blundered into the 9/11 snare with one overreaction after another . . . much of what [Bin Laden] has achieved we have done, and continue to do, to ourselves.

--Ted Koppel, 9.12.10

[Islamic] terrorists regard themselves as “jihadis” - heroic Islamic warriors and conquerors. They see their enemies as “infidels” - enemies of Allah. Yes, the jihadis and those who support them have grievances against America, Europe and Israel. But resolving policy differences is not their goal. Their goal is to defeat the West, and to restore to Muslims the power and glory they enjoyed in the past and which they are confident they are destined to enjoy again.

Iranians are paying members of the Taliban to kill American soldiers in Afghanistan. Think about that: Iran’s rulers are collaborating with the Taliban, an affiliate of al-Qaeda. Political leaders . . . ought to be pondering what . . . it will mean if Tehran succeeds in acquiring nuclear weapons. . .

-- Clifford D. May, President, Foundation for Defense of Democracies, 9.11.10

It takes a high IQ to evade the obvious.

--Thomas Sowell, 9.7.10

Why are intellectuals such as Ted Koppel so determined to downplay the serious, ongoing threat we face from Islamic extremism? Does a high IQ really lead people to evade the obvious?

Most Muslims aren’t “jihadis,” but the minority who are jihadists threaten peace more than any other group of believers practicing politics/terror today. Most Soviet citizens longed for peace; those who didn’t fought in Spain, signed a non-aggression pact with Hitler that while enabling Hitler to invade Poland and start World War II, led to U.S.S.R. seizure of eastern Poland, Latvia, Lithuania, and Estonia, war with Finland, the eventual conquest of Eastern and Central Europe and creation of a satellite empire, the creation North Korea and the invasion of South Korea, theft of A-bomb secrets and a subsequent Cold War that threatened the entire planet.

A significant minority of American intellectuals supported the U.S.S.R. in the 1930s, a big majority during World War II when the Soviet Union was an ally, smaller numbers wanted to “ban the bomb” in the 1950s and found sympathy with Castro in the early 1960s. As a result of America’s Vietnam debacle, the intellectual left gained control over the Democratic Party in 1968, forcing Democratic President Lyndon Johnson from office. Since then, Democrats, led by its intellectuals, have generally opposed U.S. military action abroad, favoring big government at home, a small military footprint overseas.

Republicans, junior partners in big government/big military coalitions led by Roosevelt, Truman, Eisenhower, Kennedy, and Johnson from 1941 to 1968, are now the party of national security; the only unified political force still focused on overseas threats. And making the separation complete, Republicans now strongly believe in small government at home.

The division shapes our deeply contrasting visions. To intellectuals, smarter than the rest of us, it’s obvious Islamic extremism doesn’t threaten our way of life—homegrown poverty, racism, poor education and health, religious superstition, and polluting businesses pursuing short-term profits do. We can fix our problems by having intellectuals spend money wisely at home.

Here’s what the rest of us realize. Intellectuals are so focused on their domestic enemies, the ones trying to downsize all the government programs they lovingly put together with their own hands, that they refuse to see bad people who don’t like us will take us down unless we fight back, and it’s urgent we beat the bad guys to the punch. We won World War II because we fought back, but at great cost—we could have begun earlier and saved millions of lives. We won the Cold War by fighting back each step of the way, having learned our lesson in World War II. Now, post-9/11, we’ve got another war to win.

9/12.

Immigrants Saving America

Joel Kotkin makes a lot of sense. I’ve quoted his work here, here, and here. Now he’s writing about how much impact immigrants will have on the American business model. His main facts:

➢ Between 1990 and 2005 immigrants started one quarter of all venture-backed public companies. . . CEOs with roots in foreign countries [lead] 14 of the of the 2007 Fortune 100.

➢ eight Indian American CEOs run U.S. corporations with over $2 billion in sales, including . . . Citicorp, Adobe Systems and Pepsico[, with] Coca Cola. . . run by . . . a native of Turkey.

➢ Between one-third and one-half all students at Stanford, MIT, University of Pennsylvania, University of Chicago and UC Berkeley [business schools] come from abroad.

➢ immigrants are 60% more likely to start a new business than native-born Americas. . . the immigrant experience . . .encourages innovation--. . . the advantage of non-acceptance. . . [H]istorian Irving Howe notes that the immigrant need[s] to find an unoccupied or underserved niche . . .

➢ In 2005 the U.S. swore in more new citizens than the next nine countries put together. . . more than half of all skilled immigrants in the world . . . come to the U.S. . . 400,000 E.U. science and technology graduates resid[e] in the U.S.

➢ nearly one in three [Houston] restaurants serves Mexican or Asian cuisine. . . account[ing] for more establishments than hamburger, BBQ and Italian restaurants put together. . . Immigrant-founded firms such as El Pollo Loco, Wolfgang Puck and Panda Express, are emerging as the McDonalds of 21st-century America.

➢ The emerging post-racial economy provides two distinct opportunities for American business. First the newcomers offer a new domestic "emerging" market. . . minorities could account for over $2.5 trillion [in sales] by 2010, close to $1 in every $4 in total U.S. consumer spending.

➢ [Second,] the uniquely international cast of American business [means] leading American firms will not have to go to graduate school in international training; they will have received theirs at home, talking to parents or grandparents who migrated from Mexico, Cuba, Russia, Iran, China, India, Israel . . . Americans [will] tap the global market, and culture, in ways other countries . . . just can't match.

Just think how much better our economic future would be, if we only liberalized current immigration policy.

Israel's Netanyahu Wants Peace Deal

Aluf Benn is editor at large at Haaretz, Israel’s newspaper for intellectuals. Writing in the Washington Post, Benn argues that Israeli Premier Binyamin Netanyahu, contrary to what most believed just months ago, is determined to conclude a peace settlement with his counterpart, Palestinian President Mahmoud Abbas. In Benn’s words:

With no serious domestic challengers, Netanyahu knows that he is the strongest Israeli leader in a generation. Looking outside, however, he sees mostly trouble: His country is ever more isolated from an international community that increasingly rejects Israel's occupation of the Palestinian territories, its settlements and its excessive use of force. At the same time, he is deeply alarmed by Iran's quest for nuclear weapons, coupled with what he describes as its effort to "delegitimize" the Jewish state. He sees Israel's sheer existence, not its controversial policies, as the matter at stake. He therefore wants President Obama to help neutralize the Iranian threat -- and he understands that Obama's price for that help will be Israeli concessions in the West Bank.

If true, this remarkable development means Obama is on the cusp of a foreign policy achievement that has eluded every American president since Nixon. Obama will need to deliver on Iran, however, and to help Abbas give up the Palestinian refugees’ generations-old demand for a “right of return.”

The American Way

First, a Reuters editor tells America to honor democracy over dictatorship. Now a German academic tells us to honor our traditions, and not “go European” on America’s friends. In Der Spiegel, Thomas Straubhaar, a Hamburg University economics professor, takes on the “big government” strategy pushed by Princeton’s Paul Krugman, the approach Straubhaar fears Obama is following. Straubhaar writes:

what is good for Europe and Germany does not automatically work for the US[, whose] settlers . . .rejected everything . . . with a semblance of state authority. They fled Europe to find freedom. The sole shared goal of the settlers was to obtain individual freedom and live independently, which included the freedom to say what they wanted, believe what they wanted and write what they wanted. . . The state should not interfere in people's lives, aside from securing freedom, peace and security. Economic prosperity was seen as the responsibility of the individual.

If you take this belief away from Americans, you are destroying the binds which interlink America's heterogeneous society[. You thereby threaten] conflicts between different sections of society [that] have long bubbled beneath the surface.

[Better] would be a return to the American Way, the . . . success of [which] is illustrated by history. In 1820, twice as many people lived in the United Kingdom as the US, and its economic performance (measured by GDP) was three times as strong and the average standard of living (measured by GDP per person) was a quarter higher. Today, there are about five times more people living in the US than the UK, America's economic performance is about seven times better than Britain's and the average American is about 50 percent better off than the average Briton.

When Europeans and Canadians warn us about big government, it’s surely time for Americans to take on directly this threat to our "way."

China Needs Capitalism + Democracy

Chrystia Freeland, global editor at large for Thomson Reuters, in the Washington Post has a good take on why China, like all of us, needs both capitalism and democracy:

state capitalism may falter as China gets richer [because] it may be hard to allow people to become consumers without letting them become real citizens, too. One of China's big economic challenges over the next decade will be to allow its domestic market to grow. That will mean giving the Chinese people more spending power. As the Chinese become more bourgeois, they may demand more political rights, too. . .

[China’s] state capitalism [needs] innovation. The American political economy has many flaws . . . But America has one great virtue that no other country has yet to replicate: When it comes to innovation and its translation into things people want, America is unbeatable. This is the country of Apple, Google and Facebook. These are the inventions driving the technology revolution, and only an open society can create them. . .

[China's] centuries of stagnation [stemmed from] its centralized, authoritarian state. As economic historian Joel Mokyr has written, "the absence of political competition did not mean that technological progress could not take place, but it did mean that one decision maker could deal it a mortal blow." Meanwhile, in chaotic, divided, inefficient Europe, when one ruler decided to repress his innovators, "they did no more than switch the center of economic gravity from one area to another."

Freeland, born in Canada but of Ukrainian background, a student of Russia’s exit from Communism, has that appreciation for the freedoms we take for granted that comes best from those who know oppression. She concludes,

Dictators are easy to admire, especially at a distance. Free markets and free societies always look messy and inefficient, especially up close. But when it comes to inventing the modern world, and living at its edge, so far the best model the world has come up with is democratic capitalism.