Which Underdog Will Lose the Election?

After the American Century

There may be an advantage to being a (slight) underdog in the American presidential election.  Both candidates seem to realize this. Supporters are more motivated if the victory seems achievable but not at all certain. The polls have see-sawed up and down, with Obama generally slightly ahead of Romney, but not always.

Obama, as a sitting president, would normally not have much trouble with reelection. In recent memory Johnson, Nixon, Reagan, Clinton, and Bush II all were re-elected. But the US economy apparently is slowing down, if the new job figures are accurate, and the only presidents not to be reelected since 1916 (Hoover, Carter and Bush 1) presided over weak economies. A weak economy always hurts an incumbent. Worse still, Obama's chances might be torpedoed by economic forces completely beyond his control, notably the Greek election later this month, which seems likely to cast Europe into economic chaos, or at least uncertainty. Moreover, the Republicans have raised more campaign money than Obama, which puts the president at a disadvantage in another economic sense. 

Romney is an underdog in quite a different way. As a Mormon he can easily seem to represent a little-understood religion. In the abstract, if you ask Americans are they ready to vote for a Mormon for president, the support is weaker than for a generic woman candidate. Romney is also an underdog in another statistical sense, in that the Republicans are the smaller party, in terms of registration. But perhaps his greatest liability, with many voters, is that he is tightly linked to the financial sector. The public generally distrusts, even hates, the banks. Romney was a key player at BAIN, and this is surely not the ideal qualification for office in the wake of the misdeeds on Wall Street that led up to the meltdown of 2008.

But perhaps the real underdog is the American pubic. In 2012 Republicans and Democrats together will spend $2 billion on the campaign, a rather obscene new record. Will American voters be, in effect, sold to the highest bidder? Will clever advertising replace serious debate? Will the election be won on spin rather than substance? The poor voter will be bombarded with half-truths and misinformation, much of it emanating not from the candidates themselves but from their supporters.  If on election day the big questions on voters minds are such things as how it felt to be Romney's dog on top of his car or whether Obama has a valid birth certificate, then the public will certainly have lost the election.

Are Europe and Greek Debt like the Titanic and the Iceberg?

After the American Century

Imagine that Europe is a large ocean liner called the Titanic, and that it is sailing straight toward a massive iceberg that has appeared in the Mediterranean off the coast of Greece. The original idea  for the ship was to create watertight compartments (national economies) below deck, so that if one or more of them filled with water (debt), the others would not also fill up. But this original plan was not fully carried out in the actual construction. The ship turns out not to be unsinkable because its compartments are not sufficiently strong, watertight, or numerous.

If I could go back in time and rebuild the Titanic, I would carry out the original design more completely. Greek debt is the iceberg smashing into the Euro, and I would rather each national economy had largely to stand on its own. Unfortunately, the European "reform" that seems to be favored by most leaders today is to remove most of the interior barriers and thicken the outside hull of the ship as a whole. The idea is that superior leadership and regulation from the center will avoid most of the fiscal icebergs of the future, and that when they do come the improved hull with be strong enough. I would rather not make well-functioning economies hostage to the Italians, the Greeks, the Spanish, and the Portuguese, or for that matter to any country that in the future might get itself into financial trouble.

What can Europe learn from this fiasco? I suggest that it ought to learn to keep the national economies more separate, rather than the widespread idea that what Europe needs is more integration. Better, surely, (1) to prevent banks from loaning more than 4% of their total worth to a single country, and (2) to limit how much money any nation can borrow abroad, making it finance a minimum 75% of its own national debt. If its own citizens will not buy most of the debt, why should anyone else?

More than two years ago I argued that Greece should not be bailed out. I wrote then, "Greece cannot pay its bills, even in the short run. With a national debt that is more than 110% of its gross national product, and a deficit of more than 10% for this year, Greece's debt will only get worse unless and until it enacts real reforms. So far it has failed to do enough, and the deficit will only get worse."

Most of what I wrote then is sadly still accurate now, except that the rest of Europe and the IMF have been pumping money into Greece while insisting on draconian reforms. But it has not worked. The choices then as now are either Greece leaves the common currency and goes back to its traditional overspending (with periodic drachma devaluation) or it really puts its house in order. Sadly, the second task is beyond its political capacity, as its recent, failed election process demonstrates.

As the crisis has been prolonged, money has been fleeing the country for safe havens before the collapse which seems to draw slowly but inexorably closer. It is difficult to know precisely how much money has been transferred or carried personally away from Greece, but it is more than €1 billion. This money could have helped keep the economy going. It is like taking blood from a dying man. Adding further to the misery, tourists are wary of booking trips to Greece, because it may descend into financial and political chaos. Why go there when other places are far more stable?

The only bright spot here is that the rest of Europe has had 27 months to prepare itself, by putting some firewalls in place. Whether these are good enough is not clear.

Had the Greeks been hit with a natural disaster like an earthquake, they would deserve sympathy and charity. But for years the Greek insisted on spending more than they could afford. They gave massive pay increases and early retirement to state employees that were not funded by taxation. Tax evasion was massive. There is no reason for the other European states to give or to loan them any more money. Giving them another handout will only delay for a short time the day of reckoning.

Education Provides the Infrastructure of Tomorrow

After the American Century              

For decades, the United States had a Department of Health, Education, and Welfare, and while these are no longer joined administratively, politicians all too often seem to think that these three things belong together. They do not. 

Education is part of the fundamental infrastructure a nation needs for the economy to work. Nineteenth-century manufacturers understood this, and supported compulsory education beyond primary school. They did so because numeracy and literary are essential for an industrial economy. And when the US Congress created the Homestead Act of 1862, which sold land very cheaply to settlers willing to take a chance and go West, they also passed a law that gave some of the proceeds from selling that land for the purpose of creating universities. Today, some of these land-grant institutions are among the best in the world. These nineteenth century politicians understood that to develop the economy, the citizens had to be educated. 

In both the United States and Denmark recent studies have underlined the centrality of education and research to a strong economy. A US report warns that in the last decade the nation has not kept pace with others in science and technology education. A Danish study shows that people with higher educations rapidly pay so much in taxes that within just two years society has gotten back its investment in them - this in a society where there is no tuition and the state therefore knows with some precision just how much it costs to educate each student. Even humanities students, whom politicians often disparage as pursuing useless knowledge, turn out to repay the cost of their education after working for just two years, almost as quickly as the scientists and doctors, who, of course, cost more to train. 

Education is the heart of tomorrow's infrastructure. It has the power to transform people's lives, to assist people who otherwise might be helpless to make vital contributions. A blind person with a good education can work and contribute to society in many ways. I went to college with a blind man who now is a judge in the United States. Without an education, he would likely have been a lifelong recipient of welfare.

Welfare rescues people in need. Welfare may help a child to greater success later in life or help a struggling parent who later becomes self-sufficient again. But welfare is not, on the whole, an activity that can or should be justified because it is profitable. Education is another matter. A good educational system will make society more entrepreneurial, richer, more agile, more adaptable, or in short, more able to meet the challenges of the future. 

Unhappily, politicians keep forgetting this fact. The response to the world economic crisis of 2008-2009 in all too many places was to cut back on education. In 2010 California imposed severe cutbacks on its schools and universities, which already had had their spending slashed in earlier years. A state which was once a model for others, with a powerful educational sector driving economic growth, seems to have lost its way. In many schools 30% of the staff have been fired, libraries closed, and class sizes increased by 25 percent or more. At universities, required courses are not always available, and some students will not graduate on time because they literally cannot get into a course they need. And those who do get registered may not get a seat, as the classrooms often are not large enough to hold the expanded sections. 

The failure to fund education adequately is hurting the Californian economy both short- and long-term. When people do not graduate on time, they to not repay the cost of their education as quickly. And when fewer people get an education at all and more people get a compromised education, the economy will be hurt for the entire lifetime of that generation. For a state, this is not just stupid, but self-destructive. In Denmark, national and local authorities have slashed budgets, closed schools, and created a high unemployment rate among newly trained teachers. The actual number of teachers has declined by 8% in primary school, which is a sign of very real political stupidity. At universities, there is almost no hiring, and those retired are often not replaced. A generation is being thrown away, or rather being driven away.

For people with skills are mobile. A survey found that half of all Danish workers find the idea of taking their skills elsewhere in Europe attractive. In the United States, people have always been quick to pull up stakes and try their luck in another part of the country. In 2008 135,000 more people left California than moved in, a trend that is accelerating. Often those who leave are among the most talented, such as a student who gets a scholarship, or the newly graduated student. The young often vote with their feet. The old fashioned kind of infrastructure like roads and bridges stays put. But a world-class scientist can be lured away, and an unemployed PhD will not usually linger where no one wants her, and a newly trained teacher or nurse who cannot get a job may go abroad. Thousands od the best trained Greeks and Spaniards are leaving for work elsewhere, and quite possibly they will never come back.

If education is infrastructure, it is mobile infrastructure. A society that cuts education will lose not only the skills of (and the higher taxes that would have been paid by) those it never trained - it will also lose some of the best new people it has most recently trained. Imagine that one country invests millions in a new highly mobile bridge, but then decides not to use it. Instead, another country imports this mobile bridge without paying anything for it, puts it into use and immediately begins to profit from the tolls (income taxes), and from the improved efficiency in transport that the bridge provides. Education is that kind of infrastructure. Denmark and California (and many others) have built and abandoned the infrastructure of tomorrow.

Election 2012: Romney the Bully? Gay Marriage and the Election

After the American Century

The Gay Marriage issue has turned into the worst sort of public relations for Romney, who now comes across in his youth as a rich kid, who was an insensitive, intolerant Mormon bully. That was an unexpected bonus for the Democrats. How did this happen?

When President Obama announced yesterday that he supported gay marriage, he did not do so because there was pressure on him to do so. Nor did he say this because Joe Biden "inadvertently" said he supported gay marriage last week. Anyone who believes that is naive. Biden and then other prominent Democrats came out in favor of gay marriage as trial balloons, to see how the public would react. 

On an emotional issue of this kind, Obama does not just casually make a statement. We can be sure that his staff consulted carefully on this issue and laid out a strategy to make the most of it. The goal here is not to win the gay vote, which is likely Democratic anyway. The goal is to force Romney to make a hard choice. Either he can come out against gay marriage and alienate moderates or he can alienate the Republican right, which already distrusts him, by remaining silent on the issue or saying that gay marriage ought to be allowed. Romney wants desperately to move to the center and look moderate, in order to win over the Independent and moderate voters. Obama is forcing Romney to make a hard choice. He cannot afford to create a rift with the Republican right, but he also cannot afford to embrace them too closely if he wants to become president. 

What is fascinating in this case is not the specific issue but the way that the Democrats are using what has been a Republican issue and making it their own.Obama and his advisers evidently have decided that bringing up such issues can exacerbate the divisions in the Republican Party. At the same time, they surely have calculated the potential effect on voting in swing states before going ahead with this plan. Put another way, this announcement makes Obama stronger in New York and California, which he would win anyway, and weaker in Alabama and Mississippi, which he has little chance of winning. The key question is whether this strategy will help him to win the swing states, especially Florida, Virginia, Ohio, Indiana, New Hampshire, Colorado, New Mexico, and Nevada. 

Romney when in High School

Obama got an unexpected bonus from this strategy, when it came out that Romney, when in high school, was one of a group of bullies who persecuted one of their fellow students, This was in Michigan, and he was the son of the Governor, attending a private school. The student he attacked had long hair and was gay, though apparently not yet "out of the closet" at the time. Romney and his buddies chased him, caught him, held him down, and clipped his hair off. Apparently this bullying was directed more at the long hair and the presumably left-leaning principles that tended to go with it. This act reveals an intolerant, vigilante side of Romney that moderates will find unpalatable. Ganging up on people and persecuting them because they are different suggests an arrogance and insensitivity unacceptable to much of the public, though it could help Romney hang on to the KKK vote.