Mitt’s number

January 19, 2012

Short post of mine from the New Statesman’s US politics blog:

The big news from the campaign trail today is a number: Mitt Romney’s “effective” tax rate. At an event in South Carolina yesterday, Mitt finally conceded (after weeks of probing) that he pays “probably closer to the 15 per cent rate than anything”, putting him firmly in the 1 per cent, and firmly in the sights of people who want to change the tax system.

Mitt’s rate is so low because most of his income is from capital gains, which is taxed more generously than other income. A Republican Congress cut the rate from 28 to 20 per cent in 1997, then to 15 per cent in 2001. Thus, the US has a fairly progressive employment tax system, where people pay more as they earn more, but a regressive effective one, where private equity windfalls and stock market profits get special treatment.

Warren Buffett, the legendary “Sage of Omaha”, has famously called it iniquitous that he pays less tax, in percentage terms, than his secretary, or, as he wrote in the New York Times last year, the “other 20 people in our office” (whose rates range from 33 to 41 per cent). Barack Obama has tried to promote a “Buffett Rule” – a minimum tax rate for those earning more than $1 million a year. But both have gained little traction outside the progressive press, and the Occupy Wall Street protests. The question now is whether Romney’s number will add any grist to the debate.

Commentators yesterday speculated on the timing of Romney’s words. The conventional wisdom is that it is better for him to talk about his finances now, while he is doing well in the polls, and the real election is still months away. But it’s also possible the admission will plant a seed that will grow and grow under careful cultivation from the Democrats, and sections of the media. Obama is already planning to make inequality a main focus of his rhetoric, hoping to channel some of the OWS anger. An opponent who pays less tax than most of the population could be a perfect foil.

[ 0 comments ]

Will Gingrich force Romney to debate capitalism?

January 12, 2012

Take a look at the film that could change the 2012 presidential election, a “documentary” looking at Mitt Romney’s career at Bain Capital, the private equity firm he founded. It has been bought by Newt Gingrich’s PAC, Winning Our Future, and is about to be shown all over South Carolina, the next primary state.

The film attacks the main rationale for Romney’s candidacy – that he’s an experienced job-creator who “knows” how the economy works. And I’d say it’s pretty effective. A lot of voters are going to identify with the people who lost their jobs. They’re not going to shrug and say “well, that’s capitalism, it’s tough sometimes”, which is Romney’s response. This feels like the “swift-boating” Kerry received from Bush early in the 2004 campaign, except it’s coming from Romney’s own party. It definitely shows Newt’s bitter side (following Romney’s attack ads in New Hampshire). But it could also presage a different type of debate about capitalism in the election. In the past, the Republicans have simply said they are in favor of capitalism and free markets, and offered little distinction between creative and destructive strains. In his own way, for whatever reason, this is a mainstream Republican candidate saying there are differences in the way companies behave – they are not all the same. It’s going to be interesting to see if Romney sticks with his “my opponents hate capitalism” line, or whether he is forced to debate what sorts of capitalism he is in favor of, and which he disavows. Hopefully an actual debate might follow.

[ 0 comments ]

Notes from NH

January 12, 2012

I spent a couple days in New Hampshire for the primaries, my first experience of the campaign trail, or NH. Here are a few impressions, in no order:

1– It’s harder to dislike candidates when you see them close-up, and harder to disagree with them. I found myself nodding in agreement with Rick Santorum several times; hard to imagine I would do that watching him on TV. Strange how someone can seem so nice (he wears these cuddly sleeveless sweaters) – yet have such dangerous views, bigoted views.

2– It’s hokey-cokey to say, but people in New Hampshire take their politics seriously, even passionately. I imagined that after weeks of leafleting and canvassing, most NHers would be jaded by now. But everywhere I went – coffee shops, convenience stores, hotels, bars – people were talking candidates, positions, and tactics. Hard to imagine the equivalent in, say, some rural area of the UK. File under: enduring American patriotism, optimism, etc.

3– NH is beautiful. Beautiful, beautiful, beautiful.

4– The only interesting question as far as the primaries: what Ron Paul does. Romney is going to win, because he’s the best candidate (as in best funded, organized, prepared). The rest will drop out sooner or later, having no further impact. Ron Paul’s influence will go on, though, especially if he runs as a third candidate. Speaking to his supporters at the post-poll party on Tuesday night, it seemed unlikely they would get behind an establishment candidate like Romney, or concede that their views are marginal to the general election. They believe they are saving the republic, and they absolutely adore Paul. How can they back down when there’s so much at stake? If he is a third candidate, that would surely scramble Romney’s chances, but potentially put a dent in Obama’s numbers too. Cliche but true: disaffected voters on Left and Right have a lot in common. And there’s a lot in Paul’s program, particularly around the GWOT and civil liberties, that former Obamaites can support (see recent Glenn Greenwald).

5– ‘Live Free or Die’ is a pretty weird motto for a state. Apparently it was coined during the Revolutionary War by a hero called General John Stark, then taken up by the state’s legislature during the Second World War. Now it’s supposed to have something to do with low taxes, and minimal regulation, at least according to the Republicans (which equate freedom to a lack of government). That NH still has the motto, and are proud of it, points to the sense that NHers feel the fight is ongoing: the war for freedom is endless, and wasn’t settled with the modern arrangements of the US.

6– It’s all about the media, but the media don’t acknowledge it. I don’t have statistics, but I bet the campaigns spend as much time persuading the media they are doing well, as trying to do well. The media have a enormous role in deciding who’s up and down; at several events, there seemed to be more journalists than actual citizens; their views go in cycles; and they have a pack mentality. A story in a major paper is a major campaign event, yet the story doesn’t acknowledge its own role, keeping up the charade that it is simply reporting on what’s going on out there. All very “meta”, etc.

7– The media have an interest in keeping the race tight, because a tight race is good for business. How much was the rise and fall of Bachmann/Perry/Cain/Gingrich/Santorum as contenders to Romney driven by the media’s need for some kind of contest? In the end, NH followed a predictable and typical script where the favorite ended up winning. How much of what happened in between was genuine fluctuations in support, and how much was the result of the media in some sense orchestrating fluctuations, so they had something to report on? I’m not saying it’s completely willful. But the media has an interest, and it is tended to, somehow.

8– Primaries are great for local economies. The guy at J Dubs coffee house in Manchester said his business was booming, and that he wished the primary could happen on all the time. Where would the main streets of Concord or Exeter be without elections every four years? More here.

9– Favourite quote: Ann Romney at McKelvie Intermediate School in Bedford on Monday, recounting the conversation she’d had with her husband on whether to run: “I only had one question: Can you turn America around? And he said: yes.” Somewhere between the end of “around” and “he said”, I remember thinking: “She’s not really going to say that, is she?” But she did. It’s the sort of thing that grates an Englishman: the shamelessness of it, the untruth: everyone knows Romney has been running since he lost last time. The Romneys didn’t decide last year, as Ann said.

10– Romney appears plastic and wooden on TV, but human in person – worryingly so for Obama. That’s dangerous for Obama, because if Romney can “connect” with voters, he might win. The best chance for the Democrats is paint Romney as a Kerry or Gore: the son of privilege, and out of touch. Also, supporters genuinely like Romney, maybe not to the same degree or volume as they like Paul or Obama, but enough. Their support is emotional, as well as reverential.

(Image: dougtone)

[ 0 comments ]

2012 predictions

January 8, 2012

My predictions for 2012:

1) A China crash. China looks like Japan in the late-80s. There’s been a massive rise in real estate prices, and freely flowing credit. Even the country’s leaders admit there’s a bubble, and even China’s cheerleaders admit the official numbers are suspect. The argument is over whether those leaders can manage the downturn. Are they superhuman? Probably not. I’m not saying that China won’t become the world’s largest economy, eventually. I just don’t think its rise will go in a straight line. See Paul Krugman recent column.

2) Obama re-elected. Yes, his approval ratings are at dangerous levels for an incumbent. But the economy is what matters, and it’s on the upswing. Obama still has a lot of fans – we just don’t hear from them – and the Republican challenger will have a divided party. If it is Romney, his main argument will be that you need a business-person to run the economy. But do people really like business people like Romney that much (he was a private equity manager who laid off a lot of people)? Most of all, Romney is fundamentally unlikeable, and unlikeable people don’t become president. The media will help to keep things tight, but Obama will win – with a landslide.

3) Manufacturing repatriated. We’ll start to see some of the manufacturing that we exported to Asia and elsewhere start to come back again. A few reasons: rising wages in Asia, falling wages at home; increasing worries about “just in time” supply chains and supply shocks; rising fuel and transportation costs. For more, see this report from Boston Consulting Group.

[ 0 comments ]

Ongoing housing bubble

December 16, 2011

Thought the housing bubble was over? Prices still historically high in plenty of places:

Richard Florida article here.

[ 0 comments ]

Christopher Hitchens

December 16, 2011

This youtube is pretty representative of Christopher Hitchens – brilliant, belligerent, brutish. Who else would go on cable TV hours after someone’s death to lampoon the dead man so wholly? No doubt Rev Jerry Falwell deserves everything he gets, but is there a time and a place? I don’t know. Can’t quite decide. What I do know is that Hitchens was a one-off who deserves all the obits and flowers today. Personally, I came to him through his book on Henry Kissinger, which is typically thorough and hammering. But I respected him most for his views on Iraq – when he took up a stance in favor of the war when 90 percent of the Left was against it. I still think his argument that invasion was justified to get rid of a homocidal maniac is a good one. And I still think the Left has its reasoning backwards when it thinks it is saving lives by stopping all wars. Read:

“Those who had alleged that a million civilians were dying from sanctions were willing, nay eager, to keep those same murderous sanctions if it meant preserving Saddam!” – The Weekly Standard, May 2005.

I’m not looking to re-start the whole Iraq debate, just to say that Hitchens’ position on the war took guts to stake out, much like the rest of his life. No doubt he enjoyed playing the heretic, as in the clip. But he had guts to appear in the teeth of opposition night after night.

[ 0 comments ]

The riots: put away your Karl Marx

August 17, 2011

London riots (Peckham)

I happened to be in London last week for the riots. I was there when my old hood in East Dulwich got smashed: the Londis, the Post Office, the Palmerston, a pharmacy and a launderette, all done in.

The consensus was that it would have been worse if ED offered anything the rioters wanted. Being mostly a place of maternity and health stores, it didn’t give the looting opportunities of other areas.

Things were worse on nearby Peckham high street: Burger King, Clark’s, Ladbrokes, etc, all raided; Greggs, the baker’s, completely burnt out, front to back.

The riots were enough to produce a kind of hysteria among East Dulwich’s shop-keepers. Told that a mob was already tearing up Forest Hill and coming their way, the whole of Lordship Lane closed down in 10 minutes — at 2 in the PM.

The rumour turned out to be completely wrong, but it showed what panic can do. You don’t even have to have an actual mob to make people skittish.

But what were these riots? What caused them? How come a sleepy place like East Dulwich was affected?

There have been plenty of explanations: from police cuts and Britain’s softly-softly policing style, to festering youth alienation and lack of opportunity. People have blamed the financial crisis and expenses scandal for lowering the moral bar (as in, if they can steal and cheat, why shouldn’t I?). They have decried Britain’s consumerist culture, the boredom of the summer holidays, and the lack of better things to do.

My own feeling is that all the above have some truth to them — especially the last. There was not much better on offer in August, that’s true; smashing up things is fun; and there was an opportunity with police understaffed. Chuck in the organising influence of technology and you have yourselves a dangerous mob.

The images that stayed with me were both from walking around Peckham on Tuesday morning. The first, overhearing a “youth” of about 15 excitedly tell his friends about the “madness” of the night before, a big smile on his face; the second, a normal-looking couple at the back of Greggs, reaching into a garage that had been smashed, and filching a couple of bags from inside.

The riots, which ignited over serious police brutality, became nothing more than entertainment: an excuse for madness. Once started, they created opportunities for others to get involved, as the couple did the next day in Peckham. My bet is they were not the sort of people who would normally have looted a lock-up at 11am, with dozens of people around.

What annoyed me in the aftermath was to hear so many people use the moment to push their own agendas. There are the obvious cases, such as Ken Livingstone drawing attention to Boris Johnson’s foppishness, or Ed Miliband drawing attention to the government’s cuts. But other more subtle ones as well: from the academic who called for more money for youth research (presumably benefiting herself, as much as the youth), to religious groups calling for a return to church, to activists like Naomi Klein (see here) describing the riots as a protest against capitalism. (Strange how the riots were both consumerist and anti-capitalist).

The danger is that such discussions become about all sorts of issues that people want to push, rather than about the thing itself — i.e a series of fairly disorganised youth disturbances. Theoretical and political explanations can be useful, but not if they distract from the basic data — which to me points to something more banal. Unified explanations aside, it could be that the riots were about very little at all.

(Image: J@ck!)

[ 1 comment ]

S&P’s judgement

August 6, 2011

I’m no expert on the financial implications, but the S&P downgrade is damning on the US political class:

• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.

Hard to disagree: who wouldn’t be pessimistic about Congress and the Administration?

Hopefully, though, this will strengthen Obama’s hand to reach the “balanced” deal he wanted, i.e one including tax increases. S&P is so gloomy partly because of Republican resistance on taxes:

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

So far, Obama has been reluctant to let the Bush tax cuts expire, preferring (for political reasons) that Republicans agree to new increases instead. Perhaps, he’ll now have the balls. And, perhaps, the Republicans will have less power to resist.

[ 0 comments ]

US government isn’t working

August 2, 2011

the capitol

So, Congress has passed a bill to raise the federal debt, the US isn’t going to default, and armageddon has been avoided.. well, put off for a few weeks.

After all the tension, and all the rage directed at D.C recently, we’re in for a period of rejoicing. In the next few days, markets will surely bounce, borrowing costs will no doubt fall, poll ratings will surge, and Congress, and Obama, will be praised for coming together in a moment of crisis. The people, meanwhile, will default to a generally positive view of their country as an example to the rest of the world.

There is little to celebrate, though. First, it is a bad deal. It takes money out of the economy at a time when the US should be spending, not cutting. And it takes from the poor, in the shape of spending cuts, while maintaining tax cuts for people who should be asked to pay a share.

Second, it is not really a deal at all, in the sense of resolving the main arguments. By farming out the difficult decisions to a bipartisan committee, the players are simply re-arranging the problem in a different form (OK, getting 12 people to agree to $1.5 trn of cuts will be easier than two houses of Congress, but the possibility for stalemate remains).

What the debt deal shows – or rather what the lack of a real debt deal shows – is a deeper dysfunction in US politics, where the needs of democracy and governing are out of whack. The US system of divided government is rightly praised for providing checks and balances. But in the age of “hyper-partisanship”, it is leading to gridlock, and a lack of clear direction. At a time when the US has big decisions to make, it is either putting them off for later, or failing to get bills through both houses. Hundreds of important pieces of legislation now die each year in the Senate, unable to overcome the 60-vote barrier (necessary to avoid a filibuster). And even mid-level government appointments have trouble getting confirmed, as opposition parties exploit every angle, sometimes over what seem relatively minor issues.

If the Congress couldn’t agree on a proper deal when the US was facing a calamitous default and government shutdown, there is not much hope for legislation proposed during normal times. Generally, the system is incapable of somehow adjudicating or mediating the extreme differences between the parties. In the old days, reasonable men disagreed, but eventually compromised. Now, they simply disagree and put the problem off for another day.

Having three centres of executive power, as the US effectively has, is no way to run a country. Either it should do away with one or two of those branches (not really an option) or seriously reform Congress, so that the party that wins an election can actually carry out what it was elected to do. Checks and balances are all very well, but ultimately decision-making should take precedence.

(Image: Imagined Reality)

[ 0 comments ]

What comes next may be worse

July 13, 2011

rupert murdoch world economic forum

It’s been great to see the phone hacking scandal come to a head after so long when the issues of journalist ethics and unaccountable media power have been under the carpet. But, as the story unfolds, you have to wonder whether the resulting environment will be much improved. If Murdoch follows his decision to shut the NOTW to its logical conclusion by selling his other UK titles (as several commentators have said he might), it is hard to see new owners investing heavily in loss-making outlets, and generally maintaining standards. Newspapers, such as the Times, will still face the problem of producing good work with few resources – only now they’ll have even fewer resources.

For all his commercial nous, Murdoch has had a twilight-years sentimentality for print that successive owners are unlikely to share. Whatever its shortcomings, News International has been subsidising half the UK press over the last decade, and replacing that won’t be easy. As Peter Preston says, the most likely buyers for Murdoch’s papers are Russian oligarchs, Arab Sheiks, and Richard “Dirty” Desmond – none of whom would be first-choice proprietors:

The assumption of so much speculation now is that plurality will be rescued only when Murdoch walks away. An alternative outcome is that plurality will shrivel even more as at least three papers drop out of the market.

I don’t automatically think keeping old newspapers alive is the only way to ensure healthy journalism. Far from it. That is an argument mostly put around by journalists and managers at old newspapers, who have every incentive to present themselves as the last, best hope for free speech and democracy. There are other sorts of organisations that could emerge to take the place of newspapers, which may do a better job of holding the powerful to account (and without making themselves powers in their own right). It may be that Murdoch’s departure from the UK (if it happens) hastens a process by which artificially-supported groups are forced to close, or forced to find new business models, and new market entrants can get a start. It may be in the long-run that this scandal is an unalloyed good thing for journalism, forcing an all-round re-appraisal among providers and consumers. More immediately, though, the effect may be a net-negative, forcing titles, such as News International’s, to cut back or dumb down. There may be less diversity, not more.

That is not an argument for laying off Murdoch in the hope that he stays in the UK. He deserves everything he is getting at the moment; it’s been a long time coming. It is to say that his presence in London hasn’t been all-bad. His record is more complicated than some have made it out to be, and we shouldn’t expect things to magically get better if he does leave. New, unaccountable, individuals could replace him, abusing their power as before, enabled by politicians looking for advantage (the dynamics haven’t changed). Most fundamentally, the media still needs to go from its currently shaky position to something more sustainable, both economically and socially. That task becomes more urgent if Murdoch leaves, but it is the same job.

(Image: World Economic Forum)

[ 1 comment ]

← Previous Entries