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Saturday, December 29, 2012

Mario Monti: Succumbing to Power?

He was supposed to have been reluctantly pushed into briefly stepping in as prime minister in Italy to push austerity measures through the state legislature.  According to Deutche Welle, “The 69-year-old former European Commissioner was appointed to lead Italy’s government . . . to restore Italy’s finances following Berlusconi’s departure.” The technocrat was not supposed to so interested in power that he would want to stay on. At the end of December 2012, Mario Monti announced that he would lead a centrist group of politicians against the Democratic Party and Berlusconi’s People of Freedom party in the upcoming election.  Had the former bureaucrat “found religion” in some political cause, or had he developed a taste for power? If the latter, we might ascribe the motive to the human propensity to resist giving up power willingly.
  Mario Monti at the European Commission. A launching point for Italian politics?    source: nytimes
The full essay is at Essays on the E.U. Political Economy, which is available at Amazon in print and as an ebook.

Friday, December 28, 2012

Averting the "Fiscal Cliff": A Solution Overlooked

With just days to avert the beginning of automatic, across-the-board cuts in the U.S. federal budget and the end of the Bush tax cuts and payroll tax reductions, President Obama met with Congressional leaders at the White House following a brief respite over Christmas. The discussion was doubtless on what could pass Congress in time. The U.S. Secretary of the Treasury was also attending, so the upcoming debt-limit could also have been part of the discussion. It could be argued that the perspective itself at the meeting must have been too narrow—too small—even though the crisis demanded leadership.


The complete essay is at Essays on Two Federal Empires, which is available at Amazon in print and as an ebook. 


Speaking after meeting with Congressional leaders, President Obama could have used the crisis to propose a seismic shift in American federalism in line with reducing the federal debt. Getty Images


José Manuel Barroso: Picking Romania’s Government?

On December 9, 2012, Romanian voters approved of the coalition of the then-current Prime Minister Victor Ponta, by a two-thirds majority. However, because Ponta had been in a bitter political feud with President Traian Basescu—Ponta’s coalition tried and failed to impeach the president—it was not clear that the president would nominate Ponta for prime minister even though that post must be approved by the parliament. Basescu did wind up nominating Ponta. The interesting point here is that President Barroso of the European Commission publicly waded into the choice on behalf of Ponta. 
 Prime Minister Ponta of Romania: Propped up by Barroso?           exclusivnews.ro


The full essay is at Essays on the E.U. Political Economy, which is available at Amazon in print and as an ebook.

Thursday, December 27, 2012

Pot in Colorado: Getting High on American Federalism

On November 6, 2012, Colorado’s citizens approved with a 55% majority a marijuana-legalization measure that allows residents over the age of 21 to possess up to an ounce. The measure also allows for the commercial growing and selling of pot. More than a month later, the government of Douglas county in Colorado passed a law prohibiting companies from growing or selling cannabis. Meanwhile, the U.S. law continued to make the growth, sale, possession or use of pot illegal. Over all, it would seem to be a case of federalism as a pretzel of sorts, all twisted up into itself. This case study can be used to point to a more perfect union in terms of federalism.


The complete essay is at Essays on Two Federal Empires.

The pot leaf.   source: Mother Jones (who else)

Thursday, December 20, 2012

Is a Stronger E.U. in America’s Interest?


Is a stronger E.U. necessarily in the interest of the U.S.? According to Ed West of the Telegraph, “it’s not clear whether a united Europe would necessarily be more pro-American, automatically siding with the US against the rest. European countries have their own interests with regards the Middle East, Africa and China, which often don’t coincide with America’s, and on a range of world issues European public opinion is fairly hostile to America, decades of American military protection having inspired not gratitude, but resentment. Britain is something of an anomaly in Europe, popular opinion being unusually hostile to the EU and warm to America.” This passage can be taken to task on at least two points.

The complete essay is at Essays on Two Federal Empires, which is available at Amazon in print and as an ebook.



Thursday, December 13, 2012

A British Referendum on the E.U.

Legislators can make the task of getting instructions from the popular sovereign, the people, unduly difficult. In November 2012, the Florida legislature confronted its people with several proposed constitutional amendments written in legalese that even some lawyers found difficult to navigate through. The next month, Boris Johnson and Liam Fox of Britain pressured their state’s legislature to put forth a referendum that, unlike that of Florida, would present the people with a clear choice.

The flags of Florida and Britain             Source: allposters.com
   
The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Wednesday, December 12, 2012

How to Beat the Rap, HSBC Style

In HSBC’s settlement with the U.S. Government, the bank has to pay $1.9 billion—about half a quarter’s profit—but avoids criminal charges. The New York Times quotes government officials who said they were hesitant to indict the bank because formal charges could mean bankruptcy, which in turn could roil the financial system itself owing to the bank being too big to fail. That is to say, one of the advantages of being TBTF is apparently that of effective immunity from criminal charges.
 The full essay is in Cases of Unethical Business, which is available at Amazon.

Tuesday, December 4, 2012

SEC Goes After Chinese CPA Firms: Beyond Diplomacy

The Securities and Exchange Commission brought an administrative proceeding against the Chinese affiliates of five major CPA firms, including the “Big Four,” in 2012. Chinese companies had raised billions of dollars on American (and Canadian) exchanges only for the share prices of the companies to plummet due to questions about bookkeeping and disclosures. The SEC alleged that the CPA firms in China refused to hand over documents in connection with the investigation of alleged accounting frauds at nine Chinese companies. The SEC maintained that firms that audit U.S.-traded companies must follow U.S. law, and the Sarbanes-Oxley Act requires foreign audit firms to hand over documents about U.S.-listed clients at the SEC’s request. SEC Commissioner Luis Aguilar said that the investigations “have been hampered by the lack of access to relevant documents.” For their part, the CPA firms in China (affiliates of American-based CPA firms) pointed out that their audit papers are treated like state secrets in mercantilist China, and that the auditors could therefore be imprisoned for handing the material over a foreign government without permission from the Chinese state. 

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

Oceans Arising on Edifices of Arrogance

A study published in late November 2012 in the journal Science estimates that the melting of ice sheets in Antarctica and Greenland had raised global sea levels by 11.1 millimeters (0.43 inch) since 1992. That represents one-fifth of the total sea-level rise increase in that period. Other contributors include the expansion of the sea water from warming, and the melting of glaciers, as for instance on mountains. In the 1990s, melting of the polar ice sheets in the Antarctica and Greenland was responsible for about 10 percent of the global sea-level rise, but by 2012 the effect had risen to 30 percent.[1] The study does not, however, uncover the underlying cause, or association, lying in a complexity in human nature itself. Our species has vaunted to the top of the food chain and leveraged a brain capable of engineering technological advances that would have seemed magical even just in the nineteenth century, and yet we seem hard-wired to accelerate our course to a self-destructive extinction. This lack of balance is reflected in the increasing extremes in the global climate. In this essay, I begin with the study and steadily work toward uncovering the underlying, subterranean culprit.

The entire essay is at "Oceans Arising on Edifices of Arrogance"



[1] Gautam Naik, “Polar Ice Melt Is Accelerating,” The Wall Street Journal, November 30, 2012.


Bailouts Without Stimulus: E.U. Policy on Spanish Banks

Directly and indirectly, the housing bust that began in 2007 put “the bailout” on the map in the lexicon of industrial policy both in Europe and North America. Whereas in the U.S., few restrictions were placed on the recipients, the E.U.’s first €37 billion ($47.9 billion) for Spain’s banking sector required the four major state banks “to make sharp cuts in their balance sheets and payrolls,” according to the Wall Street Journal. Bankia, the largest of the banks to be bailed out, planned to cut its number of employees by more than 6,000, close more than 1,000 branches, pass on any further real-estate lending, and reduce its assets by €50 billion as the bank focuses on retail banking—getting back to the knitting, as it were. Presumably the bankers were not allowed to grant themselves bonuses as a condition of the bailout. If so, it would differ appreciably from the U.S. bailout of Wall Street banks.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Saturday, December 1, 2012

Bad PR and Bad Banking: BOA

How to do bad PR: Announce plans to raise fees effecting low-income customers, then pull back, wait a year, then announce such plans again, then pull back yet again. This sort of PR strategy gives rise to headlines such as, “Bank of America Backs Down on New Fees.” The Wall Street Journal could have added, “yet again.” Besides the obvious PR downside to announcing unpopular fees—and on one’s least well-off customers—is the implication of weakness or vulnerability in repeatedly backing down. In the animal kingdom, Bank of America would not exactly be the alpha male lion. Rather, the bank would be one of the other males, which may or may not get to reproduce.
                                          
The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

Monday, November 26, 2012

The Filibuster: States' Rights or a Partisan Ploy?

Before 1917, senators could filibuster only by talking continuously on the U.S. Senate floor. There was no mechanism to stop them. Such filibusters were rare until entering World War I was debated. In 1917, the Senate passed its first “cloture” rule, whereby two-thirds of the Senate could cut off debate and force a final vote. Between that year and 1971, no two-year session of Congress had more than 10 such votes. Even so, in 1971 the rules were changed to allow other legislation to be taken up during a filibuster—relieving a senator of having to continuously talk to maintain one. Making it easier to filibuster quickly led to the predictable result of more filibusters. In the 93rd Congress (1973-74), the number of cloture motions jumped to 31, from an average in the 1917-1971 period of two per Congressional session. In 1975, the number of votes needed to stop a filibuster was lowered from 67 to 60. However, this change did not curtail the use of the device, as it is rare for a party to control 60 votes out of 100 in the U.S. Senate. By 2010, the average number of cloture motions per two-year session had risen to 129, which suggests that the filibuster had become more typical in how senate business was to be conducted. In effect, legislation and even executive business, such as confirming presidential nominations, needed a supermajority (60 out of 100) in the upper chamber of Congress.


The complete essay is at Essays on Two Federal Empires.





Non-Tariff Barriers to Trans-Atlantic Trade

Karel De Gucht, the E.U. trade commissioner, said in late November 2012, “There is now, for the first time in years, a serious drive towards an E.U.-U.S. free-trade agreement.” The office of his counterpart, Ron Kirk, the U.S. trade representative, indicated that a high-level working-group consisting of Europeans and Americans was working on “how best to increase U.S.-E.U. trade and investment.” The sticking point concerned non-tariff barriers, such as different regulatory standards.
Karel De Gucht, the E.U. Trade Commissioner, advocating a free-trade pact with the U.S.  (Reuters).


The complete essay is at Essays on Two Federal Empires.

Sunday, November 25, 2012

Steve Jobs: The Sad Truth about Visionary Leadership

According to Joe Nocera, Steve Jobs was not a consensus-builder but a dictator. Lest it be objected that this disqualifies him from being admitted to the “true leader” hall of fame, Nocera hints at an explanation for why visionary leaders may not be all that touchy-feely after all. Nocera suggests that Jobs was a dictator because he “listened mainly to his own intuition.” He “never stopped relying on his singular instincts in making decisions” on Apple products. This makes complete sense, as his sense was singular. 
                               Steve Jobs at Apple. Is it the vision or charisma that accounts for the focus on such pictures?   Getty

The full essay has been incorporated into (or swallowed up by) On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available in print and as an ebook at Amazon.

Friday, November 23, 2012

Mexico’s Name-Change: A United States No Longer?

Shortly before leaving office, Mexican President Felipe Canderón sent to the Mexican legislature a proposal to amend the state’s constitution by renaming the country “Mexico,” from the “United Mexican States.” His rationale was that Mexico didn’t need “a name that emulates another country and which none of us Mexicans uses on a day-to-day basis.” Indeed, the emulation evinces a category mistake in that it treats what was province in an empire, that of New Spain, as an empire.
                                   Mexico's head of state, Felipe Calderon, who proposed the name-change.  
The full essay is at Essays on Two Federal Empires.

Thursday, November 22, 2012

Moody’s: Statist France Lagging in the E.U.

Bashing the French in a major article on their lack of business competitiveness, the Economist was the target of la colère en Paris in November 2012. Just after the magazine’s warning that France could be the next danger-zone for the euro due to relatively high labor costs and unemployment, Moody’s cut the state’s rating to Aa1 from Aaa and kept a negative outlook on the rating. Moody’s cited the state’s economic weakness and the risks to the finances of the state government “posed by” France’s “persistent structural economic challenges.” In this way, Moody’s analysis dovetails with that of the Economist. Both pointed to a sort of impotence in French industrial policy. Moody’s decision excluded factors from the broader debt crisis in the E.U., focusing instead on the French government’s continued “reliance on borrowing to finance generous social-welfare programs” even as businesses in the state were laying-off employees. In other words, Francois Hollande had not gone far enough in his policies to make a dent in the state’s deficit as well as the downward trajectory of French competitiveness in the E.U. Meanwhile, deteriorating economic conditions in the E.U. were effectively closing the window of opportunity on even a one-party government being able to enact substantive reform. I contend that the gap between what the Socialist party could do, given its absolute majority in the legislature, and what it was actually doing contributed to the criticism.
Changes in real GDP in the state of France. A general downward trend-line is apparent.     Source: World Bank
The full essay is in Essays on the E.U. Political Economy, available in print and as an ebook at Amazon. 

Wednesday, November 21, 2012

House of Commons Undercuts Cameron on E.U. Budget

In 2012, David Cameron of Britain “suffered his first major House of Commons defeat” in governing  “when some in his party failed to back his position on the budget negotiations and urged him to secure deeper cuts” in the pending 1 trillion euros E.U. budget for 2014-2020.  Although Cameron had stated he would veto the European Commission’s proposal to increase the overall E.U. budget by 5% annually for the seven-year period, he did not support cutting the federal budget. Because the vote in his state legislature for cuts in the federal budget was non-binding, the governor was free to ignore it in the European Council, where the state governments are represented. The European system of public governance suffered from at least two major weaknesses here.

The complete essay is at Essays on Two Federal Empires.


 David Cameron representing his state at the E.U.         AFP/Getty


Tuesday, November 20, 2012

States Pull Ahead of E.U. on Syria: A Compromised Foreign Policy?


In November 2012, the New York Times reported that the European Union was offering “crucial support for the new Syrian political opposition,” which the E.U. referred to as the “legitimate representative for the Syrian people.” The E.U. stopped short of “conferring full diplomatic recognition” to the new group—the National Coalition of Syrian Revolutionary and Opposition Forces—even though one of the E.U.’s states, France, had conferred such recognition one week earlier, and another state, Britain, would soon do likewise.


The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Thursday, November 15, 2012

The U.S. Producing More Oil: A Panacea or Obstacle?

The International Energy Agency projected in 2012 that a shale-oil boom would catapult the United States over the state of Saudi Arabia as the world’s largest oil producer by 2020. In the words of the Wall Street Journal, the global energy map was “being redrawn by the resurgence in oil and gas production in the United States.” Although the United States would benefit in the period from the trajectory, the drawbacks should not be ignored. In fact, the trend could be harmful in the long term if preparedness for a world without oil is put off as a consequence.

The entire essay is at "The U.S. Producing More Oil"

“Fiscal Cliff” in U.S.: Real or Hyped?

As the U.S. economy slogged through a recession following the credit crisis in 2008 and the E.U. was weighed down by the ballast of austerity in the most indebted states, developing economies, including those of China and India, kept the world economy afloat. As a group, those economies grew 7.4% in 2010, 6.2% in 2011, and 5.5% in 2012. In keeping with this trend, the Global Economic Outlook of the Conference Board predicted 4.7% for 2013. Fortunately, the Board also predicted a pick-up in consumer demand in the U.S. to pick up the slack. “The only really short-term positive impact that we can have is that we can see a faster return of demand, particularly in the U.S.,” the Board’s chief economist said. As of 2012, such a return was not necessarily “in the cards.” The pessimism can be seen in the projected world economic growth of 3 percent, which is lower than the 3.2% expected in 2012 and the 3.8% achieved in 2011. That the projected growth rate of only 1.8% for the U.S. in 2013 is less than the projected 2.1% for 2012 indicates that increased demand in the U.S. was not expected to fully pick up the slack for the slowing-down of the developing economies. Here I want to point to a major factor in the U.S.: the possibly impending “fiscal cliff” of cuts in the federal budget and the end of the Bush tax breaks  that were scheduled to begin on January 1, 2013 unless Congress and the White House could come to a legislative agreement beforehand on an alternative way of holding down the deficits. Presumably that way would have a less recessionary effect.
 
In doing political risk analysis, one might be tempted to weigh in on predictions of a grand deal. I submit that predicting whether one comes together, as well as its differential economic impact would be, is not merely difficult, but also nearly impossible—unless one has “inside information” from the key players in Washington. Political risk analysis is not a sort of crystal-ball operation. Predicting the future is notoriously difficult for us mere mortals. However, we can assess how the prospect of a possible event, such as the “fiscal cliff,” is being played out in real-time. In other words, it is possible to determine whether the “fear-mongers” are exaggerating the probably economic impact (and why!). Assessing the severity of the worst-case scenario can thus be recalibrated, with implications for strategic planning.
 
Should the automatic cuts in the U.S. federal budget and end of the Bush tax cuts begin on January 1, 2013—a combined hit of over $500 million in that year alone—a “recessionary toll” was generally held to be the result. That is to say, the domestic demand made possible by increasing discretionary spending would be reduced as government spending decreases and federal income taxes increase. The Global Economic Outlook pointed to the prospect of Congressional and White House negotiations potentially obviating the sequestration as bearing on the global economic growth. Even though Congressional leaders could be counted on to rise to the occasion in delivering on sufficient dramatics at the last minute, the general public could not be sure that the denouement would involve a quick swerve away from “fiscal cliff” as though in some 1940s film noir.
 
Just by the numbers—around $500 million in 2013—the Conference Board may have been overstating the recessionary impact of the sequestration in an economy whose GDP was over $16 trillion. For one thing, the momentum in 2012 was in the direction of increasing demand. Also, corporate planning may have already “hedged their bets” so “going over the cliff” would not actually involve much change, at least initially, on their part.
 
I must add here the caveat that I not an economist. Hence, I do not have the quantitative expertise necessary to "run the numbers" on how much GNP would decline from the sequestration. However, I have run economic regressions, so I have some sense that the actual variables in a political economy are not as formulaic as those in a regression equation. The inherrent uncertainty in the political dimension in particular renders suspect the “empirical social science” approach of modern economics as determinative in political economy. Put another way, the political-risk-analysis dimension of an economic growth projection introduces considerable uncertainty in an otherwise quantitative economic numbers game, which might itself be overly deterministic or "exact." Even if we could untangle the myriad political factors going into political negotiations beforehand, we would still have to accept the uncertainty that is inherent in predicting the future, especially where human decisions are in the mix. That is to say, the future cannot be known for certain, given the respective natures of time and human beings.
 
I suspect the differential economic impact between a possible deal and sequestration was being exaggerated, particularly by the media but also by officials in government and CEOs—all of whom had subterranean reasons for doing so.  The media’s “fiscal cliff” label alone illustrates the proclivity to exaggerate. It is not as though a deal would have absolutely no drag on the economy, even if significantly less than that of sequestration. However, in distinguishing between “some” and “more” in terms of a drag on consumer demand in the U.S., the impact on the overall global economic output may be less than the “fiscal cliff” rhetoric implies because the world is much more than the American union. In other words, if the “differential” in terms of economic impact between a deal to cut the deficit and sequestration turns out to be less than portrayed in 2012, the resulting impact on the larger global economy would also be less.
 
In terms of a prognosis for 2013 from the vantage-point of late 2012, my best guess was that it would be largely similar to 2012 globally—the U.S. and E.U. continuing to climb out of deep recessions while struggling to inflict austerity on themselves for their own good, and the developing economies continuing to cooling their heels from growth rates that were probably unsustainable anyway. In terms of international business prospects, “continued languid” rather than “fiscal cliff” would be my headline.
 

Source:

Matthew Walter, “U.S. Seen Propelling Growth of Global Economy in 2013,” The Wall Street Journal, November 13, 2012.

Tuesday, November 13, 2012

Women on Corporate Boards: Britain vs. the E.U. Justice Commissioner


In 2012, women made up 13.7% of board positions in large listed companies in the E.U., and 15% for nonexecutive board positions, according to The Wall Street Journal. In the U.S., according to Kay Koplovitz of USA Network, the number of women on corporate boards had been stalled at more or less 15 percent for over ten years. Whereas in the U.S., people would look at Congress to enact a uniform inter-state standard or else leave the matter to individual corporations, the E.U. has other alternative means, such as the directive. That device relies on the state governments to decide on the penalties as well as enforcement against violators of the E.U. law. Even though the Commission could take a state refusing to implement a directive to the European Court of Justice, the “cost” of the flexibility in the state-based implementation is a possible dilution in the law’s aims being achieved throughout the E.U. rather than just in a few states. Put another way, even as the ideological diversity within the empire-scale union is accommodated, advocates of more female representation on corporate boards may be disappointed as some states give non-complying companies only a slap on the wrist.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Keeping the Palestinian Authority Down at U.N.

In “defiance of retaliation threatened” by the United States and the state of Israel, the Palestinian Authority announced in November 2012 that it planned to hold a vote in the U.N. General Assembly on the Authority’s request to become an observer state. According to The Wall Street Journal, “(s)uch a designation would give the Palestinian Authority the right over its airspace and territorial waters.” The Authority could participate in General Assembly debates, sponsor resolutions, and nominate candidates for Assembly committees. The Authority would be able to accede to treaties and join specialized U.N. agencies, such as the International Civil Aviation Organization, the Law of the Sea Treaty, the Nuclear Non-Proliferation Treaty, and the International Criminal Court. The Authority could thus press charges against Israelis before the Court.
Because 132 states had already recognized the Authority as a sovereign state and the U.S. does not have a veto in the General Assembly, the vote was expected to be in the Authority’s favor. Rather than wade into the long-standing Israeli-Palestinian standoff, I want to investigate the nature of the responses of the Israeli government and the United States to the likely passage.
In retaliation, Finance Minister Yuval Steinitz said in Israel, “If the Palestinians continue to advance their unilateral move they should not expect bilateral cooperation. We will not collect their taxes for them and we will not transfer their tax revenues.” Had the Palestinian Authority had held a similar position concerning unilateral moves, the Israeli government would doubtless not have held off in its unilateral moves, such as building a wall. Perhaps taxation should be added to the rights of observer states. The hypocrisy alone would justify that, not to mention the threat being made.
I suspect the control over airspace and the membership at the ICC were of particular concern to Israel. Security concerns were a given. Given Israeli influence over the American Congress, I suspect that the Israeli officials would also bristle at Palestinian demands being enforced by an over-arching authority to which Israel was at least in theory subject. That is to say, being held accountable.
Also in anticipatory retaliation, the American Congress “threatened to cut off $500 million in security and economic aid” to the Authority. Here, the American Government having been accustomed to the comfort of its veto on the Security Council no doubt left officials feeling a sudden and as though terrifying loss of control. Hence, as though impulsively, the Congress acted out in a manipulatory fashion to circumvent being in the minority on a vote.

Furthermore, the American threat suggests that the Israeli government might have disproportionate influence in the halls of Congress and in the White House, even given the state’s ally status. The duopoly of two major parties in American politics may be complicit here. The result may be that Israeli interests come before even American interests in American foreign policy.
Concerning both the state of Israel and the fifty United States, it is the tenor of such blatant threats and manipulation that is particularly striking in this story. Might it be that the reactions, particularly if knee-jerk, are in essence cultural—meaning that manipulation and threats have come to be a common feature of human interaction in those states. Rather than being to criticize Israeli or American policy, my point is that the reactions themselves can be indicative of a certain cultural decadence concerning the way certain people “deal with” not getting their way. Beyond the sheer childishness in “taking one’s marbles” if one does not get to make the rules of the game is the sordidness of the mentality that threatens and manipulates as a matter of course. I suppose the real question is how—or even whether—such a value system can be changed. At the very least, one is inclined by the fitting moral disapprobation to see to it that that particular psychology does not get its way, or is at least frustrated in the pursuit of its particular tactics. Making them transparent can be a first step to a better world, at least as among persons.

Source:

Joe Lauria, “Palestinians Set U.N. Vote, Defying Retaliatory Threats by U.S., Israel,” The Wall Street Journal, November 13, 2012.

Sunday, November 11, 2012

Democratic Addiction to Congressional SuperPACs?

According to Rodell Molineau, executive director of the Democratic super PAC American Bridge, "The meta-lesson from [the 2012] election cycle is that showing up and participating in the process is key, which is something that we didn't do in 2010. I think a lot of Democrats ceded the field on super PACs because most people in progressive circles didn't believe in the Citizens United ruling." The fact is, sometimes you have to play by rules you don’t agree with in order to compete. The obvious danger is that one gets coopted by those rules in the process, even having a financial disincentive to push for a repeal of the problematic rule. In other words, the rule gains the benefit of being the status quo and thus becomes extremely difficult to dislodge. In this case, the rule is that of unlimited corporate and union spending made possible by the U.S. Supreme Court’s Citizen’s United ruling on January 21, 2010.
 
In 2010, the Huffington Post reports, “conservative outside groups held a three-to-one advantage in spending on House races and a slightly more than two-to-one advantage in Senate races, according to the Center for Responsive Politics. The formation of the Democratic super PACs and their coordination with traditional liberal groups—labor, environmental and women's groups—helped cut that advantage to less than two-to-one in both House and Senate races in 2012, according to Federal Election Commission data. . . . In the end, conservative groups reported spending $102 million on House races, compared with $79 million for Democratic groups. In Senate races, conservatives spent $135 million, compared with $89 million for Democrats.” However, former U.S. senator Russ Feingold, co-author of the 2003 campaign finance reform act, said, “I don’t think we won because of this thing.” This remark is crucial should it be necessary to ween Democratic Congressional leaders off an addiction to the sugary superPAC money.
 
One other major factor the former senator could have been referring to is the impact on Congressional races of the Obama campaign’s ground-game and related systematic data-collection efforts in 2012. Specifically, the campaign was able to identify new voters, track their opinions, and get them out to vote. Congressional campaigns and even groups such as MoveOn were able to tap into that resource in getting out the vote. Getting out the base made all the difference in the 2012 election, particularly as most counties in most states shifted back in a Republican direction after tilting blue for Obama in 2008.
 
Another factor is the mistakes that Congressional candidates themselves made, such as Richard Mourdock, the Republican candidate in Indiana for the U.S. Senate seat formerly held by Dick Lugar, claiming that a rape victim getting pregnant is “God’s will.” It is questionable whether any amount of superPAC money could undo such a gaffe.  A similar though less outlandish case involves Mitt Romney’s comment made in private to a group of rich potential donors that it would not be his job as president to worry about the 47 percent of Americans who did not own income taxes (but paid other taxes) in 2011. In other words, voters are capable of ignoring the political ads in such cases and voting on the basis of what they have reason to believe more accurately depicts the candidate’s judgment and opinions. One would like to think that voters could see through the slickly marketed political ads on television in every case, but having the ad edge can help a candidate, particularly in reducing the opponent’s support.
 
Sadly, having a lot of money counts in Congressional elections. In the constitutional convention in 1787, some delegates worried that Congress, unlike the state legislatures, would be an aristocratic body—even the U.S. House, which was to be the repository of democracy in the new federal government. By the twenty-first century, the populations of the states had become much more than they were in 1787, including relative to the number of members of Congress. The U.S. as a whole reached 300 million around the year 2000, with only 535 members of Congress. The aristocratic element can be seen in these numbers alone. It should be no surprise that candidates for those offices would attract a great amount of money, and with it private influence over public policy. Even were Citizens United upended by a future decision or an amendment to the U.S. Constitution, it would be difficult to hold back the flood of money attracted to all the power that Congress has amassed since the Great Depression in the 1930’s. 
 
In other words, the sound of money is simply a reverberation of the nature of power in an increasingly consolidated political empire. Whether or not the Democratic Party succumbs to its financial incentive to retain SuperPACs to which donors can give unlimited amounts of money, effective campaign finance reform would be part of a broader and deeper reform oriented to breaking up the concentration of power in what was once known as American federalism.
 

Source:

Paul Blumenthal, “Democratic Super PACs Trim Conservative Advantage in Congressional Races,” The Huffington Post, November 10, 2012.

 

Friday, November 9, 2012

U.S. Election 2012: Obama Vindicated?

The U.S. presidential election in November 2012 was the first in which neither of the major-party candidates participated in the campaign matching system that imposes campaign spending limits in return for federal financing. It was also the first presidential election since the Citizens United case in 2010. That U.S. Supreme Court ruling was a significant factor in the election because corporations and unions could dip into their respective treasuries directly, rather than only through employee or member contributions, to spend an unlimited amount on political ads by making donations to “social welfare” organizations. Without disclosing their donor lists, these non-profit organizations could create political ads that in turn could favor or criticize a particular candidate, albeit with no formal approval from the favored candidate. Faced with formidable super PACs pumping some $800 million or more in favor of Mitt Romney, Obama’s money-machine went into high-gear in a sort of “rich man’s” arms-race. Some rich donors had spent millions of dollars to push the massive ship of state a discernible distance in their direction. Hardly anyone expected that the contending high monies would virtually cancel each other out. Hardly anyone thought the Obama campaign’s scientifically-based “ground game” oriented to getting new voters registered would trump Romney’s financial support from Wall Street. Subtly missing in action among all the financial fire-power and, Obama’s empirical operation, and even all the presidential “debates” were ideas and a sustained societal discussion of a few basic principles of political economy and governance. The result, in spite of all the money, time and effort, was a continuance of the political status quo because few minds were changed in the process. That is to say, ideas and related rational argument are required for a basic shift in a body politic.

Referring to the federal election, the New York Times reported afterwards that “the overall cost of the campaign rose accordingly, with all candidates for federal office, their parties and their supportive ‘super PACs’ spending more than $6 billion combined.” The grand result for all that money was that the U.S. House remained in Republican hands, the U.S. Senate continued with a slim Democratic majority, and the Democrats held the White House. Even the deal-makers—the major players—notably John Boehner, Nancy Pelosi, Harry Reid, Mitch McConnell, and Barak Obama—remained in place. The difficulty they had had as a group in coming to agreement on major policy items before the election was essentially unchanged.

On Thursday, November 8tth the New York Times summed up the previous year and a half as follows: “After $6 billion, two dozen presidential primary election days, a pair of national conventions, four general election debates, hundreds of Congressional contests and more television advertisements than anyone would ever want to watch, the two major political parties in America essentially fought to a standstill. When all the shouting was done, the American people on Tuesday more or less ratified the status quo that existed at the start of the day: they returned President Obama to the White House for another four years, reaffirmed Republican control of the House and kept the Senate in Democratic hands. As of Wednesday, the margins in the House and the Senate had each changed by just two or three seats.” For all the money, time and effort spent kicking up dirt and picking fights, when the dust settled it was clear that the American electorate had not moved much at all.

It is not that the American electorate intentionally voted for continued divided government or gridlock. Rather, the American body politic contained voters of diametrically-opposed political, economic and social ideologies. In spite of the length of the campaign “season,” neither camp had budged by election-day. The resulting continuance of the status quo meant the continuance of the political constellation in Washington that had led to gridlock. Besides gridlock being more generally etched into the very design of the federal lawmaking apparatus in part to check power as well as unwelcome encroachments of the General Government on to the turf of the state governments, the various stalemates on the Hill in 2011 and 2012 were a manifestation, or symptom, of where the People as an aggregate stood then politically—that is, divided and even polarized ideologically. As a result of the stark ideological differences between citizens and the multiple points of access available in the U.S. Government, both major parties had sufficient electoral support and accessibility to the federal law-making machinery to grind policy-making and legislative activity to a halt on major problems desperately in need of solutions.

A story in the New York Times on the day after the election had as a headline, “Electorate Reverts to a Familiar Divide as Obama’s Support Narrows.” He “garnered just 50 percent of the popular vote, three percentage points lower than in 2008, in a sign of just how divided” the electorate was “over his leadership.” In spite of Obama having lost some of his base, the mere two-percentage-point difference in the popular vote between the two major candidates meant that among the electorate neither “side” had budged much. To find a “verdict” on the president’s first term beyond the vested opinions of the two bases, one must look to how the independents. Even there, the “verdict” was muted.

Referring to the independents, the New York Times reported that the vote was “very close.” In some swing states, including Ohio and Virginia, Romney received a slight majority of such voters (53 and 54 percent, respectively), while Obama received similar majorities in a few others (Iowa and New Hampshire). However, Obama received 45 percent of the independents over all (Romney got 50 percent), and in 2008 Obama had received 52 percent. This means that Obama lost some of the independents he had had in 2008. As a “verdict” of the relatively neutral “jury” segment within the electorate, the loss of 8 percent suggests something less than a vindication for the president.


Moreover, that Obama received 50% of the popular vote over all while Romney got 48% suggests that the contest ended unchanged as a virtual draw. Put another way, only about 3 million Americans out of 310 million residents in the U.S. separated the two candidates in the popular vote. About 1% of the entire population hardly constitutes a mandate, as if “the American people” has swung around en mass to support the incumbent after a long and hard-fought campaign.

 President Barack Obama on Election Night 2012.     Source: The Atlantic


To be sure, some general movement can be discerned, as most counties had shifted in the Democratic direction in 2008 to vote for Obama only to shift back in a Republican direction in 2012. It could be said that the country had returned to its native center-right position. That Obama’s narrower base came out in sufficient force to counter the general shift in a Republican direction in most counties and a slight shift away by some independents accounts for his slight majority in the popular vote (and his wins in almost all of the swing states). Even so, such wan movement does not constitute the sort that is associated with an idea or mandate. Put another way, even the shift toward “Obamania” of 2008 was short-lived—the ideational shortfall rendering the “movement” as akin to a short-lived energy spirt from cotton-candy rather than new muscle from rich protein.

Accordingly, “(t)he bottom-line scorecard [from the 2012 federal election] left Washington as divided as ever,” according to the Times, “with no resolution of most of the fundamental issues at stake. The profound debate that has raged over the size and role of government, the balance between stimulus spending and austerity and the proper level of taxation has not been settled in the least.” The ideas had not changed because the hyperactive campaigns had been relatively bereft of new ones or even serious discussion of the central principles.

For all of the money, ads, and “debates,” one might say that talking points rather than novel arguments or ideas took center-stage during the long campaign “season.” In an interview on CBS’s Sixty Minutes broadcast shortly before the election, David McCullough, who had written several books on American political history (and who spoke at my doctoral graduation ceremony!), said he doubted that any words from the two major presidential candidates would stand the test of time. In fact, nothing said or written during even the “debates” was worthy of being retained past the news cycle of the day. The historian went on to contrast the contemporary talking-points with the authenticity in Truman’s “Give ‘em hell Harry!” campaign of 1942. In 2012, talking points backed up by fund-raising and the application of empirical political science to getting elected punctuated the candidates’ trajectories along paths of political-least resistance.

Considering the sheer duration of the primaries and general campaign, the opportunity-cost of shallow campaigning is in terms of foregone governance not only during the duration, but afterward as well. Moreover, the empty-form of a superficial campaign-mode exacerbates the fundamental flaw in having extended the campaign “season” further and further:  Taking a means—that of selecting office-holders to govern—as more important than its end, governance. The eclipse of governance at the federal level in the U.S. is from not only gridlock, but also the enabling ideational emptiness of the modern campaign elongated into a sustained void of sorts that the electorate allowed to take on a life of its own. 

For the body politic to shift as a body having a will from the status quo such that political leadership evincing a direction could replace gridlock and stasis, some ideational-ideological change would have to have occurred in enough voters that the contours of the body itself will have changed. Sadly, the experience of having gone through the financial crisis of 2008—rather than any new idea or exchange of ideas—led an unusually high 51% of the presidential voters in 2008 to favor more government intervention in the economy while only 43% wanted more things to be left to business. The unusually high percentage was a result of economic fear and perhaps even greater hardship due to the crisis, rather than from a national debate centered on a reconsideration of old ideas.

That even powerful people can reflect on the level of fundamental ideas and come to different conclusions genuinely rather than in a political calculation (e.g., Obama’s “change” on gay marriage during his re-election campaign) suggests that citizens too can allow themselves to be more open ideologically and thus shift. An empirical crisis, for instance, can jar loose even fundamental paradigms. For example, Alan Greenspan, a former chairman of the Federal Reserve, admitted in Congressional testimony after the financial crisis of 2008 that the freezing-up of the commercial paper market in September 2008 had shown him that his free-market, or laissez-faire economic paradigm had a fundamental flaw. He marveled before a panel of lawmakers that forty years of observing markets had done nothing to point to the flaw. Specifically, the market mechanism itself can freeze-up rather than make pricing adjustments under conditions of high volatility involving high uncertainty and risk. In September 2008 as banks lost trust in each other, they stopped lending rather than adjust their rates of interest upward to compensate for the additional risk. High risk, especially if occurring all of a sudden, can paralyze a market’s mechanism. Hence, the former central banker could suddenly discern a rationale for regulation by the government because of the “fatal flaw” in the “market-alone” paradigm.

Had the ideas behind Greenspan’s paradigmatic shift percolated through the electorate during the presidential election of 2008 or even 2010 in place of “Obama as the flavor of the month,” the percentages on the question would not have subsequently flipped back in 2012 back to “center-right” on the question of the role of government in regulating business. Rather, a fundamental shift similar to that which ushered in the New Deal in the 1930s would have been realized. That Greenspan’s “ideational moment” had not registered in the campaigns or the electorate itself at least by 2012 can be seen from the fact that Romney called for financial deregulation even though the lack of regulation of mortgage-based securities had played a significant role in the financial crisis. Absent a sustained paradigmatic reflection from a shared experience of the financial crisis, the electorate was vulnerable to the financial-political power of Wall Street as it continued as though legitimately along its familiar trajectory of profit and self-interest. It is significant that even though Obama came out slightly ahead in 2012, the electorate as a body evinced a shift back to its pre-2008 center-right position on government intervention in business.

Absent new ideas and a sustained reflection on the continued viability of extant paradigms, an electorate succumbs to the status quo. More money—much more money—and more time—much more time—does not necessarily mean that an election-cycle makes a dent in the judgment of the popular sovereign—the We the People—come election day. An election-campaign season should be a rather brief yet poignant opportunity for a genuine societal reflection that results in the body politic being in a new place—that is, changed in some way that will reflect on the ensuing governance. I contend that the way Americans elect the president of the Union was by 2012 not only flawed, but also rather ineffectual and even impotent. It is as though a runner were running in circles only to end up panting where he had begun. To use another analogy, it is as though the voters woke up the day after election day still hungry in spite of having eaten so much cotton-candy. The sacrifice of governance alone, not to mention the value in the popular sovereign (the We the People) making its judgment on general policy and candidates, suggests that elections should include new ideas and substantive arguments rather than each side hammering in more of the same through an eternally-repeated stump-speech and “debate” talking-points.

If there is one thing we can discern concerning the voters almost without exception on the morning after voting, according to the Times, “they were glad that the strident and polarizing contest between President Obama and Mitt Romney was ending.” Beyond the proliferation of negative ads, especially in the “swing states,” and the sheer length of the primary and general campaigns, the voter-frustration may reflect a still-unsatisfied hunger for ideas and authentic, substantive discussion of them and the paradigms we construct out of them and what can be termed, ideational values. I suspect that the want of ideas and genuine discourse had existed for so long that few if any Americans realized what was at the core of their discontent regarding the election cycle. The root may go far deeper than Citizens United and even the serial elongation of campaigning at the expense of governance. It may be asked whether a starving man will eat if he does not realize he is starving.

Sources:

Jackie Calmes and Megan Thee-Brenan, “Electorate Reverts to a Familiar Partisan Divide,” The New York Times, November 7, 2012.

Susan Saulny, “The Most Sought-After Voters Were No Longer Flattered by the Attention,” The New York Times, November 7, 2012.

Jeff Zeleny and Jim Rutenberg, “Focus Is On Economy As Voters Choose,” The New York Times, November 7, 2012.

Michael Shear, “As Electorate Changes, Fresh Worry for G.O.P.” The New York Times, November 8, 2012.

Peter Baker, “Obama Wins a Clear Victory, but Balance of Power Is Unchanged in Washington,” The New York Times, November 8, 2012.

Sara Murray and Patrick O’Connor, “How Race Slipped Away From Romney,” The Wall Street Journal, November 8, 2012.