2010 November 02 Tuesday
Electoral Outcomes And The Economy
The obvious needs stating:
The second reason cost the Republicans big in 2008 and now that same reason is costing the Democrats big in 2010.
Of course after the 2008 elections nauseating national Democrats (and their cheerleaders in the mainstream press) proclaimed the Democratic gains as a new age that showed Americans had wised up and repudiated the Republicans. Now we will hear from nauseating national Republicans making similar proclamations. My advice: Filter out the partisan noise and talking points. Scan for more rational voices who are trying to figure out and explain the real reasons why economies rise and fall.
The general public is not made up of deep economic analysts who can sort thru the causes and effects for why things go awry or get better. Partisan celebrations of the wisdom of the electorate fly in the face of the ugly truth about the irrationality of voters.
Since I expect continued weak economic performance in 2012 the key to electoral success in 2012 is to act like the other political party made all the important economic decisions in 2011. Hard to do with a Congress and White House split between political parties. So how can each party pose like is the dominated underdog against the baddies in the other party who really have control of the levers of power?
Neither party has a clue about why the economy will stay in the dumps and get even worse. All you have to do is watch the price of oil if you want to know how strong or weak the economic recovery will be.
An article in the New York Times talks about how politicians first elected to office during economic downturns (e.g. like now) experience career successes because they get to take credit for economic recoveries and they just plain get to ride along with the happy mood of the public during economic upturns. But this time a trend bigger than the policies of either party will assure that there's not going to be a happy period around the corner.
Oil supply is not the only long term problem building up in America's economy. But by itself it is enough to cause terrible economic performance for the next 20 years.
Democrats will control the Senate and the presidency. So people will hold them accountable in 2012.
If there's a blessing to the Republican defeat in the Senate, it's that they can pass the buck.
Besides, people forget who controls the Congress generally. In 2008, a significant percentage of
voters, according to a poll, thought Republicans were in control of Congress. Why? Because
George Bush was president. So the same may happen again, especially if Democrats control the Senate.
Has anyone done a careful analysis of where middle class household net assets would now be if the gains in productivity had been distributed to them rather than the managerial elites?
Reganomics and Keynesian economics are both trickle-down differing only on whether the top is in the public sector managerial elite or in the private sector managerial elite.
It is fascinating to me that folks still, after being kicked in the groin repeatedly, can't bring themselves to see that peak oil is less important than the destruction of the kind of Wright Brothers creativity that springs from a robust middle class. As I said in 1992:
Political rhetoric defining "the rich" or "the wealthy" as those with high levels of income or capital appreciation, focuses public sentiment against the most productive members of society and away from the centralization of net assets as the underlying problem.
The incentive for productivity in the economy, left after the disincentives of capital welfare are subtracted, is the long-term
economic growth rate minus the interest rate on the national debt. When the interest rate being paid on the national debt equals the growth rate of the economy, the fruits of all productivity are being confiscated to pay capital welfare and the incentives for productive investment and labor disappear. When the incentives for productivity become negative due to capital welfare in excess of the economic growth rate, wealth is structurally centralized at the expense of others in the economy. The absolute level of net assets owned by the general population actually decreases so as to increase the net assets of the wealthy. This not only removes all incentives for production and entrepreneurial investment from the economy, but consumer demand collapses as credit is liquidated to pay for necessities.
It is under these circumstances that demands for socialist intervention in the economy via "public investment" take on an air of urgent legitimacy.
In such a desperate environment, Marx's arguments in "Das Kapital" appear as rational and appealing as any made by Schumpeter, Laffer or even Adam Smith. It is therefore critical to understand to what extent socialist criticisms of capitalism are valid so we can credibly argue against their fallacies -- particularly when they are promoted during obvious manifestations of capitalism's flaws.
In his first 100 days, Obama had the political capital to replace all taxes with a single tax on net liquidation value of assets and to replace all transfer programs and all government-funded technology development with a monthly citizen's divided, including a "bailout" of the middle class equal to the wealth the middle class had lost to the managerial elites since the onset of boomer fertility. He blew it. Now the Austrian School guys (now known as "Tea Partiers") are going to try to restart the private sector centralization of wealth and drive the world even further into the ditch.
Energy is a problem but it is soluble if you get the right capital distribution. There is no chance of that now.
James is right. There is no point going on living. But being polite, I'll wait until I read James' obituary before signing out myself.