The Republican story line is that our
tepid recovery is due to the private sector refusing to invest and
create jobs because of the Obama administration’s supposed profligate
spending, anti-business attitude,
and excessive regulations. This data, however, doesn’t support this
argument. Rather, the two primary headwinds for this recovery, relative
to the ones following the last two recessions, are big cuts in
government spending and jobs (mainly at the state and
local level) and the weak housing market, as these charts show (click to enlarge):
For a more valid comparison, look
around the world – it was a global recession – and ask yourself which
major country has done better than we have? Would you trade places,
economically, with Germany, France, the UK, Japan, or China? Relative
to other countries, we’re doing reasonably well, as this
IMF report documents.
Economic Plan Going Forward
There isn’t much bold or visionary in
Obama’s economic plan going forward, but I view more of the same as a
far better alternative than Romney’s plan, which has three pillars: tax
cuts, deregulation, and
austerity. Well, we tried the first two under Bush – and look where it
got us! As for adopting severe austerity measures in the hopes of
reining in our huge deficits, we don’t have to speculate on the
consequences because major countries around the world have
tried this plan and the actual, real-world results are providing strong
evidence that such a course of action, while the economy is still weak,
would not only likely cause another recession and enormous human
suffering, but would actually make the debt/deficit
problem worse by choking off growth.
It’s also noteworthy that Massachusetts ranked 47th out of 50 states in
job creation while Romney was governor.
This is the guy who’s going to fire up our economy and magically create millions of new jobs???
In summary, I thought Bill Clinton summarized it best in his speech at the Democratic National Convention:
In Tampa, the
Republican argument against the president’s re-election was actually
pretty simple — pretty snappy. It went something like this: We left him a
total mess. He hasn’t
cleaned it up fast enough. So fire him and put us back in.
(Incidentally, I thought Clinton made the best case for Obama I’ve heard – click
here to watch it and
here to read the transcript.)
The Deficit, Debt, and the Budget Deal
“Ah,” Republicans say, “but more of
the same under Obama will bankrupt us, as we’re running big deficits and
he doesn’t care about this and just wants the government to become
bigger and bigger.” My response
(channeling my inner Joe Biden): malarkey!
Obama inherited a budget that had
ballooned thanks primarily to the economic collapse (and, to a lesser
extent, the spending policies of Congress and his predecessor), but
since then the growth of federal
spending under Obama has been lower than that of any president since
Eisenhower, as this
chart shows:
So, yes, both federal outlays and the deficit, as a percentage of GDP, are very
high, but Obama didn’t create this – he inherited it. The real question,
therefore, is which candidate would be more likely to reduce our deficits?
I continue to be puzzled by people
(like me) who are gravely concerned about this issue, yet who are
supporting Romney in spite of his vague budget plan that promises to
make matters much
worse: he’s not only promised $5 trillion of tax cuts but also
wants to spend another $2 trillion on the military (which the military
isn’t even asking for!), yet refuses to offer
any specifics on what he would cut to offset this. I think this is disingenuous, reckless, and irresponsible.
Congress, of course, would likely pass
the tax cuts and extra spending under Romney – that’s politically easy –
but it’s unrealistic to think that Congress (especially given that
Democrats are more than
90% likely
to retain control of the Senate) will make the savage cuts to
entitlements and sacred cows like the home mortgage
and charitable deductions and waiving taxes on home sales and employer
health insurance that would be necessary to offset Romney’s big cuts.
Obama, in contrast, has embraced a
grand bargain along the lines of Simpson-Bowles that would include $2.50
of entitlement cuts for every dollar of tax increases (focused mainly
on the wealthiest Americans).
Most sensible Republicans agree with this broad outline for a deal, but
nearly all Republicans in Congress have instead signed Grover
Norquist’s insane pledge of no tax increases under
any circumstances, which is the primary obstacle to a budget deal.
To get such a deal done, hundreds of
members of Congress are going to have to show serious political courage
and agree to very difficult compromises, but what Democrat would agree
to vote for painful spending
cuts that hit Democratic constituencies particularly hard unless the
Republicans agree to tax increases on the wealthy? While it’s true that
such tax increases, by themselves, won’t raise enough revenue – millions
of people, not just the wealthy, will have
to pay at least somewhat more in taxes – the political reality is that
the wealthiest people have to go first for any deal to get done.
The other key ingredient of a deal is
tackling the soaring costs of entitlements, which is extremely difficult
politically for any Democrat. Realistically, to get enough Democrats in
Congress to support
a deal that truly reforms entitlements, there will need political cover
from a Democratic president who has the courage to do a Nixon-to-China
moment. A fair criticism of Obama is that he didn’t provide this cover
during the budget negotiations in the summer
of 2011, when a grand bargain seemed tantalizingly close (Republicans
are also to blame, as Boehner couldn’t deliver his right wing), but I
think Obama will be able to do so
once he no longer has to run for office ever again. This is key
for two reasons: first, I think it will let Obama be much more
courageous in many areas such as the budget, immigration, and gun
control; and secondly, it might lead Republicans to be less
obstructionist (it would certainly be in their political self-interest to do so).
Thus, if you really care about the
unsustainable deficits we’re running and want a president under whom
there’s the greatest chance of a grand bargain budget deal, you should
be supporting Obama, not Romney.
He’s been much more realistic and pragmatic on this issue and, as a
second-term president, will be able to make the tough compromises
necessary to get a deal done.
Tax Reform and the Buffett Rule
A key part of any budget deal will be
reforming our personal and corporate tax code, which is riddled with
outrageous loopholes that favor the richest and best-connected
industries, companies, and individuals
(myself and my fellow money managers included!). One small part of the
overall tax reform – and a critical component of any grand bargain on
the budget – is making sure that all of the wealthiest individuals pay a
federal tax at least equal to an average working
person – the so-called Buffett Rule, which Obama supports and Romney
opposes. I wrote an op ed in the Washington Post about this (click
here) and posted further details and a Q&A
here.
But
what about the claims of Republicans who say that a country can never
tax its way to prosperity and that raising taxes, especially on
so-called “job creators,” will hurt our economic
recovery? It’s a convenient and self-serving argument, but there’s
little evidence to support it. In fact, as this
article notes:
…the
whole history of the last 20 years offers one of the most serious
challenges to modern conservatism. Bill Clinton and the elder George
Bush both raised taxes
in the early 1990s, and conservatives predicted disaster. Instead, the
economy boomed, and incomes grew at their fastest pace since the 1960s.
Then came the younger Mr. Bush, the tax cuts, the disappointing
expansion and the worst downturn since the Depression.
Today,
Mitt Romney and Mr. Ryan are promising another cut in tax rates and
again predicting that good times will follow. But it’s not the easiest
case to make.
Much as President Obama should be asked to grapple with the economy’s
disappointing recent performance (a subject for a planned column), Mr.
Romney and Mr. Ryan would do voters a service by explaining why a cut in
tax rates would work better this time than
last time.
Bipartisanship
There’s a raging debate over who’s to
blame for the toxic political climate and the total inability of the two
parties to work together to address the critical issues our country
faces. No doubt both sides
share plenty of blame, but I want to address the myth that Romney was a
model of bipartisanship when he was governor of Massachusetts, where he
faced a legislature that was 87% Democrats. According to this
article:
…on closer examination, the record as
governor he alluded to looks considerably less burnished than Mr. Romney
suggested. Bipartisanship was in short supply; Statehouse Democrats
complained he variously ignored, insulted or opposed
them, with intermittent charm offensives. He vetoed scores of
legislative initiatives and excised budget line items a remarkable 844
times, according to the nonpartisan research group
Factcheck.org. Lawmakers reciprocated by quickly overriding the vast bulk of them.
…in contrast to his statements in the
debate, many say, Mr. Romney neither mastered the art of reaching across
the aisle nor achieved unusual success as governor. To the contrary,
they say, his relations with Democrats could be
acrimonious, and his ability to get big things done could be just as
shackled as is President Obama’s ability to push his agenda through a
hostile House of Representatives.
Income Inequality
The U.S. has the greatest income inequality
it’s had since just before the Great Depression: the top 1% (which
includes me) earn nearly 20% of all income, control about
33% of all wealth, and captured 93% of the
income growth in 2010 (37% went to the top
one-hundredth of 1%). Even worse, contrary to the belief that America is the land of opportunity for all, we have the
least equality of opportunity among
all developed countries. The majority of Americans have made no economic progress for well over a decade, and the median income of a full-time male worker is
lower than it was
four decades ago.
This is not only a huge moral issue
and one that threatens the future social and political stability of our
country, but there’s increasing evidence that it’s an economic
one as well, as this article highlights:
But economists’ thinking has changed sharply in recent years. The Organization for Economic Cooperation and Development
this year warned about the “negative consequences” of the country’s
high levels of pay inequality, and suggested an aggressive series of changes to tax and spending programs to tackle it.
The I.M.F. has cautioned the United
States, too. “Some dismiss inequality and focus instead on overall
growth — arguing, in effect, that a rising tide lifts all boats,” a
commentary by fund economists said. “When a handful of
yachts become ocean liners while the rest remain lowly canoes,
something is seriously amiss.”
The concentration of income in the hands
of the rich might not just mean a more unequal society, economists
believe. It might mean less stable economic expansions and sluggish
growth.
That is the conclusion drawn by two
economists at the fund, Mr. Ostry and Andrew G. Berg. They found that in
rich countries and poor, inequality strongly correlated with shorter
spells of economic expansion and thus less growth
over time.
And inequality seems to have a stronger
effect on growth than several other factors, including foreign
investment, trade openness, exchange rate competitiveness and the
strength of political institutions.
Obama cares about this terrible
problem and his policies will help ameliorate it, while I think the
opposite is true for Romney and the Republican party.
Class Warfare
The
charge the Obama has been fomenting class warfare has been repeated so
often that it’s taken as dogma by many, but I’m not buying it. Pointing
out rising income inequality and its
pernicious consequences isn’t class warfare in my book, nor is
highlighting absurdities in the tax code that result in many of the
wealthiest people paying much lower tax rates than average Americans. In
fact, the federal tax rate of the 400 highest-income
Americans has been nearly cut in half since 1995 to below 17%, at the
same time that their wealth
quadrupled!
Nor is it class warfare to point out that
a lot of people made a lot of money in ways that contributed to the
Great Bubble, which led to the Great Recession, but it was middle- and
low-income people who suffered the most and who have benefitted the
least in the recovery.
Obama,
like virtually all Americans, regardless of political persuasion,
celebrates people who work hard, build successful careers/businesses,
and consequently
do well for themselves – but when our government is running big
deficits and needs to raise revenues (in addition to cutting spending),
he’s simply saying that those who are most able to pay more in taxes
should be the ones to do so. This is common sense,
simple math, and basic fairness.
Meanwhile,
Republicans have shown that they are willing to fight to the death – to
the point of being willing to have the U.S. default on its debts – to
prevent the taxes of even the wealthiest
Americans from going up by even a penny. Yet at the same time they want
to force even the poorest Americans to pay federal income taxes (in
addition to payroll, sales, and other taxes the poor already pay). And
they accuse Obama of engaging in class warfare?!
Regulation
Another oft-repeated myth is that it’s
becoming increasingly hard to do business in the U.S. due to an
anti-business climate and excessive regulation introduced by the Obama
administration. In fact, the
U.S. remains the 4th best country in the world in terms of ease of doing business according to the
World Bank (unchanged under Obama), and the Obama administration has implemented
fewer regulations than the Bush administration
did in its first term.
I’m a strong believer in firm, prudent regulation, which saves lives (see
this story about grain silo accidents and
this one about the deadly fungal meningitis outbreak), protects the environment,
and prevents bubbles. If there was one lesson from the Great Bubble – in fact,
all financial bubbles – it’s that the financial sector needs to be closely regulated, as Nobel Prize winner Joseph Stiglitz argues:
…anyone with a
sense of history would realize that capitalism has been plagued with
booms and busts since its origin. The only period in our history in
which financial markets did
not suffer from excesses was the period after the Great Depression, in
which we put in place strong regulations that worked. It’s worth noting
that we grew much faster, and more stably, in the decades after World
War II than in the period after 1980, when
we started stripping away the regulations. And in the former period we
grew together, in contrast to the latter, when we grew apart.
Obamacare
This is Obama’s signature achievement
of his first term, and I’m delighted that we’re on a path to providing –
as all other developed countries do – basic healthcare to
all Americans, rather than continuing to leave 45 million of our fellow citizens in the lurch without coverage. Here’s a
summary of the law’s benefits:
·
Allowing children under 26 to stay on their parents’ policies
·
Lower drug costs for people on Medicare who are heavy users of prescription drugs
·
Free immunizations, mammograms and contraceptives
·
A ban on lifetime limits on insurance payments
·
Insurance companies cannot deny coverage to children with pre-existing conditions
·
Starting in 2014, insurers must accept all applicants
·
Once fully in effect, the new law would start to control health care costs
Obamacare encourages a wide range of
pilot programs, and the Obama administration plans to vigorously
encourage the best of them (along with current known best practices).
Romney claims that he’s going to keep
the good parts of Obamacare and eliminate the bad, but I don’t buy it.
In reality, his plan would likely leave 45 million of our fellow
citizens uninsured and relying
on emergency rooms, would shift more Medicare costs to beneficiaries
via voucher programs, and shift more Medicaid costs to the states via
block grants.
The Safety Net
In addition to healthcare, I think the
government should provide a basic safety net for the millions of
Americans who fall on hard times: Social Security, Medicare, Medicaid,
foods stamps, jobless benefits,
etc. Reasonable people can disagree about the extent of the safety net,
how long it should be provided for,
how to mitigate issues of dependency, etc., but the Republican party
isn’t engaging in this discussion – it just
wants to shred the safety net. I don’t want my country to be a place in
which millions of people lead Hobbesian lives that are “solitary, poor,
nasty, brutish and short.”
Supreme Court
I’m very concerned about conservative
activism by the Supreme Court, which has led to such terrible decisions
as Citizens United. Obama has appointed two excellent justices,
Elena Kagan and Sonia Sotomayor, while Romney’s campaign web site says
he will “nominate judges in the mold of Chief Justice Roberts and
Justices Scalia, Thomas and Alito.” Egads!
Women’s Rights
I have three daughters and want them
to have full equality, including the right to sue if they’re
discriminated against in terms of pay (Obama supported the Lilly
Ledbetter
Fair Pay Act, while Republicans opposed it). In terms of health-related
issues, I think women should have full access to and insurance coverage
for contraception (remember
Sandra Fluke and Republican
attacks on Planned Parenthood, to which Romney said he will deny federal funding?) and have the right
to a safe abortion, which the Republican party opposes in all cases, including rape, incest, or the mother’s life being at risk.
Gay Rights
I yearn for the day when people are no
longer scorned and discriminated against because they love someone of
their own gender. Obama ended the military’s policy of “don’t ask, don’t
tell” and recently went
public with his support for gay marriage, which has helped spur the
marriage-equality movement around the country. In addition, the Justice
Department has stopped defending the Defense of Marriage Act against
constitutional challenges. In
contrast:
Mr. Romney
opposes same-sex marriage and supports the federal [Defense of Marriage]
act, which not only denies federal benefits and recognition to same-sex
couples but allows states
to ignore marriages made in other states. His campaign declared that
Mr. Romney would not object if states also banned adoption by same-sex
couples and restricted their rights to hospital visitation and other
privileges.
Education
This is the area of greatest agreement
between the candidates. Obama has been very courageous in pushing
reform via Race to the Top, etc., to the point where I think he’s
already done Nixon-to-China in
this area. Romney would continue most of the same policies, but would
likely be less effective because the main political obstacles to reform
are in the Democratic party, so it’s much more impactful to have a
Democratic president leading the charge.
Gun Control
Every year more than 30,000 people are killed by guns, our homicide rate is 6.9x
higher than the average of other developed countries, and there have been 43 mass
shootings in the past year. How many more massacres of innocent citizens
are we going to endure before adopting sensible gun control laws???
I don’t quarrel with the right of
law-abiding citizens to own guns, but isn’t it just common sense that
there should first be a background check to weed out those who are on
the terrorist watch list (I
kid you not – they can legally buy guns!),
are mentally ill, have a violent past, etc. And is it really a good idea to
allow concealed handguns in bars? And surely it’s sensible to ban high-capacity magazines, which have
been used in virtually all mass shootings. Legitimate self-defense
doesn’t require a 100-round magazine!
Obama favors sensible gun control laws but, clearly wary of losing the votes of gun owners in swing states, hasn’t pushed
this issue at all, though I think this is likely to change in his second term. Romney was
actually strongly in favor
of gun control
when he ran for Senate and served as governor of Massachusetts – he
once said assault weapons were “instruments of destruction with the sole
purpose of hunting down and killing people” – but of course he’s
completely abandoned those views and there’s no reason
to believe that, as president, he’d do anything but toe the NRA line.
Energy, Climate Change, and the Environment
Obama has been a sensible
environmentalist, though this hasn’t hurt the oil and gas industries: domestic oil and natural gas production has
increased every year
of his administration (in 2011, American oil production reached the
highest level in nearly
a decade and natural gas production reached an all-time high), and oil
imports as share of U.S. consumption decreased from 57% in 2008 to 45%
in 2011.
Romney was once a sensible environmentalist as well. As governor of
Massachusetts:
He pushed to
make homes and businesses more energy efficient. He offered government
incentives for renewable power and, early in his administration, tried
to tackle climate change
with fees on excessive corporate emitters of greenhouse gases.
But, as with so many other issues, candidate Romney has very different
views. He:
·
Called the Environmental Protection Agency “a tool in the hands of the president to crush the private enterprise system.”
·
Seeks to
eliminate the EPA’s power to regulate carbon dioxide and remove its
rules limiting emissions from coal plants, saying “I exhale carbon
dioxide. I don’t want those guys following me around
with a meter to see if I’m breathing too hard.”
·
Argues there’s a lack of scientific consensus on climate change.
·
Opposes “any and all cap-and-trade legislation.”
·
Favors giving states the ability to regulate drilling and issue leases (even on federal land).
·
Supports
opening all federal land for oil and gas drilling, including the Arctic
National Wildlife Refuge and the Pacific, Atlantic and Alaskan coasts.
·
Opposes the renewal of the wind tax credit.
·
Criticizes Obama’s stimulus bill funding for solar, wind and electric vehicle companies.
·
Opposes Obama's vehicle efficiency mandate.
Foreign Policy
Given that he had little foreign
policy experience, opposed the Iraq war, and won the Nobel Peace Prize,
there was concern that Obama would be another naïve, Jimmy Carter-like
wimp when it came to foreign affairs. He’s been anything but – he
finally got Osama bin Laden, dramatically increased the number of
drone attacks, intervened in Libya to prevent a genocide and remove Gaddafi, and implemented tough
multilateral sanctions on Iran. And thankfully Obama pulled us out of Iraq and we’re on our way out of Afghanistan.
As in so many other areas, I can’t
figure out what Romney would do as president. After fiercely criticizing
nearly every aspect of Obama’s foreign policy for years, the Romney who
showed up in the third
debate endorsed just about everything Obama has done and is doing (see
Jon Stewart’s hilarious
video montage demonstrating this). Unfortunately, I think the real
Romney is the hawkish neocon, as evidenced by the fact that 17 of Romney’s 24 special advisors on foreign policy
served
in the Bush-Chaney administration. Do we really want to wind back the
clock
and turn our foreign policy over to people who are skeptical of
diplomacy, fail to appreciate soft power, and engage in arrogant
saber-rattling?
Israel
As for Israel, my favorite line of all
three debates was Obama saying: “When I went to Israel as a candidate, I
didn’t take donors, I didn’t attend fundraisers. I went to Yad Vashem,
the Holocaust museum
there, to remind myself – the nature of evil and why our bond with
Israel will be unbreakable.”
I applaud Obama for standing up to
Netanyahu on settlements and insisting on implementing tough sanctions
on Iran and giving them a chance to work before launching a premature
attack. The last thing we
need is another war in the Middle East (keep in mind that Iran has more
than double the population and is nearly four times the size of Iraq).
Some have confused Obama’s actions
with not being a friend to Israel, but nothing could be further from the
truth. As John Heilmann correctly
notes:
In attempting
to apply tough love to Israel, Obama is trying to make a stalwart ally
see that undertaking the painful and risky compromises necessary for
peace with the Palestinians
is the only way to preserve the Zionist dream—which is to say a future
as a state both Jewish and democratic. His role here is not that of the
callous assailant but of the caring and sober brother slapping his
drunken sibling: The point is not to hurt the
guy but to get him to sober up.
…The premise
of Obama’s approach to Israel all along has been straightforward. Given
the demographic realities it faces—the growth of the Palestinian
population in the territories
and also of the Arab population in Israel itself—our ally confronts a
fundamental and fateful choice: It can remain democratic and lose its
Jewish character; it can retain its Jewish character but become an
apartheid state; or it can remain both Jewish and
democratic, satisfy Palestinian national aspirations, facilitate
efforts to contain Iran, alleviate the international opprobrium directed
at it, and reap the enormous security and economic benefits of ending
the conflict by taking up the task of the creation
of a viable Palestinian state—one based, yes, on the 1967 lines with
mutually agreed upon land swaps, with East Jerusalem as the Palestinian
capital.
The irony is
that Obama—along with countless Israelis, members of the Jewish
diaspora, and friends of Israel around the world—seems to grasp these
realities and this choice more
readily than Netanyahu does.
In summary, I’ll let Israel’s current
President, Shimon Peres, and Minister of Defense, Ehud Barak, have the
last word: “Obama is the best president for Israel ever.”
Conclusion
In virtually every area – the economy,
jobs, social issues, foreign affairs, etc. – I think Obama has done
well in his first term (and am optimistic that he’ll be even better in
his second term), and going
forward I believe Obama and the Democrats have a more clearly defined,
realistic, better plan for our country than Romney and the Republicans.
