Obama Wins; the Republic Loses

On the one hand, I should be happy that I called it right once again.  Months ago I predicted that Obama would win and I was right.  But on the other hand…Obama won.

The practical effects of that election are that Obamacare, with all of the costs and “unintended” consequences, is here to stay.  To me, this election was a referendum on Obamacare, so I am disappointed in what I see will be the declining state of healthcare in the country. So over the course of the next few years the cost of health care will go up and its quality will decline.  That’s the perfect mixture to lead to Obamacare Part II: Single payer.

But that’s for the future.  For now, the biggest take away is that not that this was just a win for a Democratic incumbent by a rather large margin, but it was the first of what will be the new normal in American national elections:  The triumph of identify politics.

Of course identity politics are nothing new.  That’s been around a long time, but we are entering a new era.  President Obama’s campaign strategy, as leaked by Thomas Edsall on the pages of the New York Times last year.

For decades, Democrats have suffered continuous and increasingly severe losses among white voters. But preparations by Democratic operatives for the 2012 election make it clear for the first time that the party will explicitly abandon the white working class.

All pretense of trying to win a majority of the white working class has been effectively jettisoned in favor of cementing a center-left coalition made up, on the one hand, of voters who have gotten ahead on the basis of educational attainment — professors, artists, designers, editors, human resources managers, lawyers, librarians, social workers, teachers and therapists — and a second, substantial constituency of lower-income voters who are disproportionately African-American and Hispanic.

Considering that working class whites have been the mainstay of the Democratic Party since the New Deal, this was quite a startling change in campaign strategy.  But the results speak for themselves.  You can win the White House without working class whites.  This isn’t really about demography though.  That is an issue, and I’ve already heard it discussed on the post election babble on TV this morning.  As Chuck Todd said on Morning Joe this morning, “The demographic time bomb went off.” But that’s not what I’m talking about; it’s really about how we identify ourselves.

That lesson will revolutionize American politics for the future.  But I may have been among the last to pick up on the idea of whites as “the other” so I’m playing a bit of catch up.  I didn’t even know that white was now being used as a pejorative; at least culturally.  Politically it’s been going on for a while. That’s clear to the most casual viewer of MSNBC. Slate took the position that white men were out of step with the rest of America, with a 23 point gap between Romney and Obama among whites.   What’s up with those white people?  Why can’t they get with the program?

As the lamest, majority/minority in America, white people continue to both fascinate and repel the “normal” people of the country.  As a San Francisco Chronicle columnist put it, … older white males remain the most terrified, lopsided, confused demographic in all of America, perhaps even more acutely – and more embarrassingly –  in this election than any other in modern history.

It’s clear that since Obama carried only 39% of white voters, they are no longer necessary for a win.

Four years from now, as the demography of the United States changes, these trends will become more pronounced.  In the political process at least, whites will be just another minority vying for power among a coalition of other groups. Single white women are already their own tribe.  So what does that mean for our politics?   Even if Romney had won, it would have been the last gasp of an archaic idea in US politics; political parties that are more or less based on policy decisions and ideas and to a lesser degree, ideology and the left/right continuum   Eventually, I suspect that we will be voting according to our ethnic, gender, and sexual preferences.  In other words, our politics will become more tribal.

This has been Democratic standard operating procedures for decades, but the Republican Party has mostly (not entirely) managed to avoid direct appeal to ethnic loyalties.  But it was a doomed policy.  General appeals to all Americans left out those who identified by ethnicity first.  Decades of multiculturalism have taught the country that ethnicity was first.  Eventually leaving a Republican party left with those who didn’t think of themselves as having an identity beyond their American national identity.

So the Republicans became the political party of white people.

That’s fairly standard outside of the first world nations that have representative governments.  Political parties are drawn along tribal lines and politics is a game of acquiring wealth, status, and patronage through the political process for the winning political party; which is really a surrogate for a tribal or ethnic group or a coalition of ethnic groups.  But that’s the lowest level of the political process, and our politics is reverting to it.  Our democracy is becoming less advanced, not more.

There will be lots of Republican weeping, wailing, and gnashing of teeth for the upcoming weeks, with the usual cast of “experts” giving their opinions that the Republican Party is too far right, and needs to change.  But we had in Mitt Romney one of the most moderate Republican candidates in decades, and in him a candidate who was competent and qualified.  He was just in the wrong tribe.

So for the long term big picture, Identity politics will have more to with who supports what party then any public policies, programs, or ideology.  Anyone who has studied anything about post colonial third world democracies knows what that looks like, and it’s not pretty.

We are all hyphens now.

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You’ll Know We Are in Decline When…

A few months ago I wrote about America in decline and a couple of ideas that I thought could, if not turn it around, at least keep things getting worse.  However decline is so much easier than, you know, actually doing anything about it.  I think it more likely than not that rather than getting off the couch and doing something about it, we’ll continue our long slide downward, stirring ourselves only occasionally to go to the bathroom or pop another bag of popcorn.

I had hoped that on my deathbed, right before I whispered “rosebud” to my confused yet adoring family, I could die knowing that the country was still a great power and still had a great future.  Instead, I’ll probably end up throwing a snow globe against the wall and saying, “I hope we can stay even with Argentina.”  Then I’ll die and release my bowels.

I think under either scenario at death I end up releasing my bowels, but for some reason that doesn’t fit in to my rosy America-The-Strong scenario.

English: one hundred doller bill colection

English: one hundred doller bill colection (Photo credit: Wikipedia)

But when you are in the midst of a decline it’s sometimes hard to see it.  Your national self image, inherited from a time when your country was worth a damn, will get in the way.

Case in point, France.  Why is France on the UN Security Council again?

But the current world order will give us a big clue as to when our national greatness begins its slide into that good night:  When the dollar loses its world reserve currency status.

Being the world’s reserve currency means that banks and nations all over the world keep a good stash of US dollars on hand and a lot of internationally traded commodities (like oil) are priced in US dollars.  This is great news for us since it means there is always a steady demand of US dollars worldwide to buy things priced in dollars.  This saves us the expenses involved in constantly converting our currency into another currency to buy things on the international market.  Gas prices at the pump would be even higher if we had to convert dollars to another currency, like the Euro, to buy oil.

Dollars make the world economy go round.

But the dollar isn’t what it was, and other countries are starting to tire of their financial fortunes being anchored to a now whimsical US fiscal policy. The International Monetary Fund has called for replacing the US dollar as the world’s reserve currency.  France has made a proposal to replace the dollar with a basket of several currencies.  The BRICS group of nations (Brazil, Russia, India, China, & South Africa) has formally called for revamping the world financial system and replacing the dollar.

The FED has been working overtime via QE2 to devaluate the dollar.  Not good news if you are actually holding dollars.  The longer you hold dollars, the more earnings power you lose.  Domestically we understand that as inflation.  Of course, since the Bureau of Labor Statistics has rigged our inflation counting, we really don’t know what our domestic inflation rate is, only that mysteriously, prices are going up.

Must be speculators!

Since the current FED chief and the current administration seem to have taken a damn the financial system, full steam ahead policy as far as wrecking the dollar’s value, there is little hope for a turnaround of the dollar’s decline in the near term.  I suspect that the dollar would have been dumped by the world by now if it’s nearest rival, the Euro, wasn’t also in deep doo doo.  The Euro Zone, filled with countries that have also sabotaged their own futures by sinking into debt beyond a reasonable means to pay, make the Euro a poor long term prospect since eventually to avoid default or austerity beyond what the Europeans are willing to endure, they will have to either dump the Euro and go back to their national currencies, or inflate the Euro to the point that even the Greeks could afford to pay their debts.  Either option would end the Euro experiment as we know it.   However that’s the short run.  In the long run, the deterioration of the dollar and our own expanded debt will bring us to the options that face the Europeans now; austerity (which doesn’t mean what it’s critics seem to think it means), or to inflate our currency, or as economists like to say, monetize the debt, will force the world to jump ship, if not to another single currency, than to a basket of currencies.

At that point, let the decline begin!

If the dollar is no longer the world reserve currency, the demand for holding dollars drops like a rock.  Who needs them then?  As the world dump the dollar holdings, the dollar will decline even more.  Without the massive buying of US Treasuries by governments and banks around the world, we can’t run up the massive deficits we’ve been getting away with.

And that fair readers, is Bond-Ageddon; what I call that fateful day in the future when the demand for US Treasuries collapses, leaving us no way to finance our deficit or debt.  If you want to know what sort of austerity that would cause in our government, imagine if we were told that we could no longer run a budget deficit, right now.  Immediately the government would have to cut spending.  And considering the size of our deficits, that would mean everything would be sliced, Medicare, defense, roads, pensions, you name it.  There just would be no more money, and no way to borrow enough to cover our bills.  Not just for a few weeks, but for the foreseeable future.  We would become a 2nd world nation.  Mexico will make fun of us.

So there you go, your own little early warning indicator, the demand to replace the dollar as the world’s reserve currency.  It’s not quite Rome being sacked by Vandals, but they’re on the riverbank, gazing at the city.

A version of this post first appeared on Muchedumbre.com on July 2, 2011.

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Putting the Brakes on American Decline

I originally wrote and posted this a few years ago and have gone back and re-read it since, and it still holds up.  Our big national problems are basically the same, only worse, so I felt this was worth a repost; particularly since it required only a few updates.

Baring stunning breakthroughs in longevity, I should probably be dead in 50 years or so.  But I care what happens to this country after I’m dead, and would like it to continue to be a great power.  Not just a good one, or an “OK power” but a great one.  So I thought of a couple of ideas that I think would help to guarantee American dominance through the 21st Century and beyond.  Not by any means a complete list of course, but just a couple of ideas to get us started.

Getting our fiscal house in order

This should be a no brainer, but given that we are heading for a 16 trillion dollar budget deficit, it’s clear that we are a nation that wants far more government than we are willing to pay for.  How we got in this situation is easy to see:  Republicans are no fan of taxes, but have made little headway (none actually) in cutting spending.  Democrats have a limited ability to raise taxes because the country doesn’t like to pay them, but have an unlimited appetite for Federal spending.  Add both parties in power; simmer for a few decades, and presto!   Of course that doesn’t even count the unfunded liabilities of our Social Security. Medicaid, and Medicare promises, that we have no ability to pay, now, or in the future.  That’s about 61 trillion dollars and growing.

The GOP has already put a proposal on the table to at least get the conversation started on that.  The Ryan Plan would convert Medicaid to block grants to the States and modify Medicare into a premium support plan that is similar to Obamacare’s exchanges to purchase individual healthcare plans.  It’s a start at least and it does reverse the debt to GDP ratio that the current administration has us on.

Any debt plan that doesn’t address the escalating costs of Medicare, Medicaid isn’t really a debt plan, it’s a stalling plan.

Fixing this problem should be a national priority of the first order.  It’s not of course but it should be.  The next place to start is with a balanced budget amendment.  We (both the Congress and the American people) have proven that we are not mature or responsible enough to handle an allowance without adult supervision.  We need some rules and that would be best one.  Just like we self righteously tell someone in credit card debt to cut up their cards, we need to cut up our national one.

In addition we need to redo the way federal budget is handled.  Social Security has a trust fund in theory.  In practice we spent the surplus from that year after year, for decades and in return gave the Social Security Trust fund an IOU.  Of course the days of the Social Security surplus are now over.  From here on out, we’ll be cashing those chits, not collecting them. But that’s not even the only one.  The federal gas tax is supposed to go to a transportation trust to fix our roads and bridges; infrastructure in other words.  What happened to that money?  Same place as the Social Security money, into the general pork fund.  I’m not an accountant, but even I know that taxes that are being collected for dedicated purposes, like the gas tax and Social Security, shouldn’t be spent on anything other than what was intended.  They should be in off budget separate accounts.  Fix these fiscal problems and maybe a dollar will still be worth a dollar 50 years from now.

Tapping into the brain drain

We are a nation of dummies.  We’ve allowed the K-12 educational system in this country to fall apart and since we still don’t have a national consensus on what the problem is or how to fix it, I don’t expect that to be solved soon.  However our system of colleges and universities are still some of the best in the world.  As a consequence they attract the best and brightest from all over the world to come and study. Foreigners dominate our technical graduate and PhD programs. On the world market, a degree from a US University still means something.  So naturally, as soon as one of these foreign students graduates from a degree program with useful technical skills, what do we do?  We kick his or her ass out.

We do have a Visa program to allow people with technical skills to come to this country, but we limit it to 65,000 per year.  That’s a drop in the bucket compared to refugees, family “chain immigration” and other categories that allow people in this country.

And that’s not even counting the illegals.

What should we be doing?  We should gradually increase the number of H1-B technical skills visas and reduce the percentage of the some of the other categories of Visas.  We should also make it easier to allow foreign students to convert their student visa to an H1-B.   Since we can’t produce enough home grown professionals and technically trained people, let’s just import them.  If we are going to maintain our economic dominance in science and technology, we need engineers, IT professionals, and scientists of all types.  We are able to provide domestically all of the sociology and feminist studies graduates that this country will ever need.  Maybe we should export those.

Another useful visa type is the E-2 Visa, which allows foreigners to come to the US to live as long as they invest and start a new business in the US.  The requirements on this visa are tough.  Although a spouse can come over on this visa, children can’t.  Also, if the business fails, you can be deported even if you’ve lived in the country for years.  It’s astounding to me that so many in this country want to give amnesty to people who’ve entered the country illegally, but people who’ve followed the rules, worked hard and done everything we’ve asked we can’t wait to give the boot to.

Between these two Visa types, we can get almost all of the high quality immigrants this country needs. This country is still the number one destination for immigrants worldwide.  As long as that is the case, we should take advantage and get the cream of the crop.  Long term, they provide a bonus to our country by generating upper middle class wages and paying upper middle class taxes.  You want to reduce poverty in this country?  Stop importing so many poor people and start importing an educated, English speaking middle class.

Tax haven to the world

With New York losing its battle with London as the financial capital of the world, we should be concerned that capital is finding other places more attractive than the United States.  We are losing to a European country?  There are a variety of reasons, the financial crisis, Sarbanes Oxley, and even Eliot Spitzer gets some blame for chasing away companies from New York.

And of course there is the tax treatment.  US corporate taxes are among the highest in the developed world.  Although personal income taxes in most of Europe are far above the US level, we make it up by kicking in the crotch the companies that provide jobs and economic growth.   I’ve always found it interesting that “socialist” Europeans want their businesses to succeed worldwide, while in the “capitalist” United States we hate and incessantly attack our most successful companies.  We attempted to break up Microsoft and investigated them for years for anti-trust violations; one of the most successful US companies of the 90’s.  One of the other successful companies, Wal-Mart, is on the liberal ‘sue’ list. You don’t see Finland attacking Nokia for having too large a market share of the cell phone market.

We need to redo our regulatory and tax structure to encourage capital to come to the US to invest, not chase it away.  There are several options to do this, such as the fair tax, or a flat tax.  We should have as a goal to reduce and gradually eliminate the capital gains tax.  Basically, whatever rules and regulations that successful tax havens have, we need to emulate them so people worldwide will want to put their money here.

These are just a couple of ideas and I’m sure other people have their own wish lists for what they would like to see and this is by no means a complete list.  But we need to start recognizing that the US continuing as a superpower isn’t inevitable, or even particularly likely.  It will take much effort and work to continue that status.