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Say No to Berlusconi

Mario Monti, Italian Prime Minister since Nov. 2011

Mario Monti, Italian Prime Minister since Nov. 2011

Mario Monti announced he was resigning from the office of Prime Minister of Italy despite a heroic year in which the Italians did what most people thought couldn’t be done.  He stabilized their finances and help brighten the outlook for the EU and Euro in the on going financial crisis caused by southern European lacking fiscal discipline.

Monti’s resignation, which will become official after the 2013 budget is passed, came as a surprise, sending shock waves through financial markets and the Italian political system.  This sets the stage for a critical election in February.

When Monti came into office interest rates for Italian bonds were above 7%, and Italy’s budget deficit was growing quickly.   Monti has managed to lower rates to 4.4% (meaning borrowing money is cheaper), though on news of his resignation it shot up to 4.8%    Total debt has stabilized at 125% of GDP.   Monti’s reforms  included budget cuts, reform of the labor market and other policies not always popular with the public.   As it became clear that Italians had the political will to deal directly with their problems, confidence in both the Italian economy and the Eurozone grew.

So why is Monti resigning?   Monti’s government is a ‘government of experts’ designed to make pragmatic decisions with as little politicization as possible.    Back in November 2011 Silvio Berlusconi resigned as Prime Minister after losing his majority, with international markets showing no confidence in Italy’s policies or leadership.   Monti was chosen as a technocratic leader both left and right could agree on, but one without a political mandate.

On Thursday December 6 Berlusconi withdrew his party’s support from Monti’s government.  Monti had always said that without broad political support a technocratic government was untenable.     But this sets up a potential showdown.

Silvio Berlusconi, one of the worst leaders in post-war European history

Silvio Berlusconi, one of the worst leaders in post-war European history

In my opinion, Berlusconi has been a disaster for Italy.   First elected Prime Minister in 1994 in the wake of the collapse of the Italian first Republic and the party system that defined it, Berlusconi promised to chart a new course for the country.  He said his party Forza Italia (forward, Italy!) would make Italy a modern well governed state, absent the corruption and undisciplined economic policies of the old system.    Despite being Prime Minister three times — from 1994 – 1995, 2001 -06, and 2008-11, he has not followed through.

In fact, Italy’s performed best when Berlusconi was not in office, including the job Romano Prodi did on economic policy in the late 90s to get Italy into the Eurozone.   As Prime Minister Berlusconi mirrored the corruption of the first republic (he was convicted of fraud in October — he’s out free as he appeals, but that’s just the tip of the iceberg of his questionable and likely illegal actions), and the Italian budget mushroomed.

Unfortunately the Italians may vote him back into office.   He claims he wants to stand again, and as media mogul he has the capacity to shape the narrative of the short election campaign.   Despite his faults, his personality and appeal to conservatives means he’ll win a lot of votes.

Pier Luigi Bersani, who will represent the center left in Italy's election

Pier Luigi Bersani, who will represent the center left in Italy’s election

Ironically global markets would be happier if a former Communist, Pier Luigi Bersani, were to defeat Berlusconi.   Bersani’s center-left coalition has pledged support for Italy’s commitments and vowed not to go back to the kind of politics and spending of recent years.   Berlusconi, however, has been skeptical of Italy’s commitments and has hinted that he wants to increase spending and undermine the work done last year by Monti.

Of course, Monti might himself run.   He could hope to get support from centrists and moderates who want to transcend the polarized politics of the left vs. right, and reward Monti for the work he’s done the last year.    Monti would not have the backing of a major party organization, but Italian campaigns are short, intense, and not that expensive.

A Monti victory would not only keep him in office, but give him something he now lacks – a political mandate.   A technocratic party is supposed to avoid political controversy.    When Monti pushed through labor law reforms, he met considerable opposition from Italy’s strong labor unions.   Rather than picking a fight he negotiated with them and a compromise set of laws passed.    With a political mandate, Monti’s hand in such negotiations would be stronger, though it’s unlikely he’d seek political confrontation.

The Italian parliament

The Italian parliament

This election is important for both Italy and the EU.  If Monti were to win, there would be an enthusiastic response from markets and renewed optimism that the worst of the Euro crisis is passed.  If Berlusconi were to return, Italian bond yields would rise and both Italy and the EU could be thrown back into a deep crisis.   Moreover, Italy’s path out of a flawed and corrupt system of governance would be halted; Berlusconi represents precisely what Italians must reject.

Signs are good that Berlusconi’s shine has worn off.   He’s down in the polls, and even he wanted more time to prepare for the next election.   His fraud conviction and his record as Prime Minister overshadows his media appeal and charisma.  By hanging on he deprives Italian conservatives of a viable alternative.    When markets prefer a former Communist to a successful capitalist businessman, that says something!

Still, Berlusconi has had a remarkable capacity to come back and no one should underestimate his Machiavellian political skills.    His return to power would be a disaster for Europe and Italy.

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The Impact of Sandy:

Reality trumps politics in the wake of Hurricane Sandy

Hurricane or “Superstorm” Sandy (weirdly nicknamed Frankenstorm by some) is likely to go down in history as the costliest storm of all time.   That’s because it hit the heavily populated New Jersey coast, with a major impact on New York city.   Four days after the storm made landfall parts of lower Manhattan are still without power.   The storm came ashore late Monday and while it passed quickly, the damage was immense.

Sea water poured into the New York subway system, sharks were seen swimming through the flooded streets of Atlantic City, scores of people died, and power outages affected over 8 million.   In Virginia and West Virginia blizzard conditions prevailed.   This was no normal storm, it was a category one hurricane meeting up with a storm system crossing the northern US and converging in a freak event, exactly one week before a closely contested US election.

After two days power is restored in most of Manhattan, but the lower part of the island remains dark

Coming as it did at the start of the last week of intense partisan campaigning, it’s natural that people glance away from the direct impact and ask “what does this mean for the election?”

Chris Christie, Republican Governor of New Jersey who gave the keynote address at the GOP convention in Tampa last August, is having none of that, explicitly saying “I don’t give a damn about the election.”   He’s heaped praise on President Obama for cutting through the red tape, surveyed the devastation with the President, asserting that when his state is suffering the worst disaster in its history politics doesn’t matter.

For Christie, this is real.  You could tell in his speech that he is shaken a level of destruction that is both massive and impossible to heal quickly.   Suddenly it’s more important to get aide to those suffering and assure a quick response than to worry about who will win next Tuesday.    Many Republicans are incensed.   One strategist fumed that Christie should have dismissed Obama’s efforts by saying “he’s doing what any President would do.”   Rush Limbaugh called Christie Obama’s “Greek column” and chastised him for welcoming the President when Mayor Bloomberg would not.    The partisans are in the middle of a war, to them Christie has committed an act of betrayal.

Heck of a job, Brownie!

Most surreal was the criticism coming from the chastized FEMA head of the Bush years, who is widely seen as failing in the wake of Hurricane Katrina.    He said Obama acted too quickly in response to Sandy.  I had to make sure the story was real, I thought it must be from The Onion.  Yes, better to wait and let people really need help before getting involved!

Apparently he was trying to tie it to failed attempts by Republicans to stir up a scandal around the Benghazi attacks in September.   Not only do Bush era officials Colin Powell and Condoleezza Rice defend the Administration, undercutting Republican attacks, but really?   He brings that up in the wake of a major hurricane?   Brownie and disaster go together!

But the storm does have an impact on the election, at least in terms of the campaigning.   It’s unlikely to shape the outcome, but it puts Governor Romney in the awkward position of not wanting to seem insensitive to the plight of the victims but needing to attack a President who appears to be pulling ahead in a tightly fought race.   Campaign events are replaced by hurricane relief efforts, with the Romney campaign purchasing supplies to assure the visuals are right in case his supporters neglect to bring contributions along.   Romney surrogates launch vicious attacks while the governor tries to soften his rhetoric.   Awkward, but what else can he do?

Both campaigns are awash with so much money that they’re buying commercials everywhere; for the first time the last week isn’t about where to invest precious resources.   At least the commercials don’t have to fake wanting to tone down partisanship.   But what impact will the storm have on the election?

The President plays a more dignified role when he’s doing his job rather than campaigning

1.  News coverage.   Normally the two competing “closing arguments” of the candidates would be dominating the news.   From Monday to Wednesday the campaign seemed almost invisible as the focus was on the devastation caused by Sandy.  This will change, but given that Romney needs to gain some traction before next Tuesday, it’s made his job more difficult.  Moreover the photos and news of Obama touring the region and by all accounts leading a successful response can only enhance his reputation.

2.   Obama’s Campaign.   President Obama had to cancel a number of campaign appearances, something his staff and volunteers in the swing states no doubt regret.   He is the number one weapon in firing up the faithful and urging them to turn out with enthusiasm on election day.   Yet I don’t think this will hurt his campaign.   Late rallies have a limited impact, and hey – he’s got Bill Clinton working the campaign trail.

3.   Climate Change:  How the campaigns can ignore this issue given the drama of this storm hitting as it did when it did is beyond me.   After the election look for a renewed push for action on global warming.

4.  FEMA is good!   In the primary campaign Governor Romney suggested FEMA be replaced by state efforts or even the private sector.   Congressman Paul Ryan’s budget envisioned massive cuts for the emergency response agency.   Now both are back peddling – reality trumps political posturing.  Big government is sometimes absolutely essential!

Campaigns are games, contests in which professionals craft messages and try to manipulate the voters in the same way McDonalds tries to manipulate potential customers.   Those caught up in the game read reality through the lens of their particular partisan preference.  Ultimately, though, reality bites.   Reality is more than soundbites, more than gaffes, more even than who’s economic plan makes more sense.

If Obama wins Republicans may blame Sandy, saying their man had momentum but the weird last week stifled his progress.    If Romney wins Democrats may claim that if Obama had been able to campaign the last week he’d have energized more voters to turn around swing states.   Neither will be true, but after the fact narratives are often self-serving.   But win or lose, both President Obama and Governor Christie made the right choice: they put their jobs ahead of politics.   In a time of crisis, that’s the right thing to do.

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Mitt’s Dog Days of Summer

For all the money spent attacking Obama, Romneyworld has left their candidate undefined and vulnerable

Newt was right.   Back during the primary campaign Newt Gingrich started to attack Romney about his time at Bain Capital, the methods the company used, his out sourcing and off shore holdings.   It was working too — until Rush Limbaugh and the Republican establishment told Newt to back off.   Making hundreds of millions of dollars is a good capitalist thing to do!

Newt protested that the Democrats would use these attacks in the fall and it was good for Mitt to have to face them early.   Primaries test candidates and see if they can handle the harshest attacks; pulling punches in primary season actually does more harm than good.   But the criticism hurt Newt and he dropped the Bain attacks.   Most people figured that Romney could easily deflect such criticism by wrapping himself in the free market veneer of “being a good capitalist and making money.”

Gingrich might have helped the Romney camp develop a better reaction to questions about Bain and taxes, but instead the GOP pressured Gingrich to shut up

Yet as the campaign trudges on, Romney’s woes grow.    To be sure, he still polls even with the President and if the economy stays in the doldrums even Alfred E. Newman could have a shot to defeat Obama.  Economic factors more than anything else shape elections, justly or unjustly.   But elections are never just referendums on a President, but a choice between two candidates.   So far, Romney is proving to be a weak candidate.

Consider Romney’s taxes.   Despite numerous demands from within the GOP for Mitt to release his taxes f or the last ten or fifteen years, he refuses.   Senate Majority Leader Harry Reid tells the Huffington Post that a Bain capital investor confided with him that Romney paid no taxes for ten years.   Reid admits he has no way of knowing if this is true, but absent his returns it remains possible.    The Democrats can continue to make such suggestions, and if Romney remains secretive most people will assume he has something to hide.

He doesn’t embrace his Massachusetts record and wants to be mum on Bain Capital, leaving only the Olympics as evidence of his competence — that won’t do in a tough race!

The Bain issue remains as well.  Despite vehement protests against an Obama advisor saying Romney may have committed a felony, it increasingly looks like the advisor was correct — Romney did not end his tenure at Bain capital in 1999.   He’s not going to be arrested but that just adds to a narrative that Romney is secretive, dishonest, and part of a greedy wealthy elite who want to institutionalize advantage for themselves.

The Romney campaign hoped to change the story line with a trip abroad to countries considered most friendly to a Romney Presidency: a conservative led Great Britain, Israel and socially conservative Poland.  Romney hoped to appear Presidential and a natural for the job.

Instead it was an almost comical farce, with even conservative pundits like Charles Krauthammer expressing exasperation over his miscues.   He looked decidedly un-Presidential, gaffe prone and small.   Mocked in Great Britain, seen as pandering in Israel and repudiated by Solidarity in Poland for his anti-union stances, Romney’s trip has been called a disaster by Republicans and Democrats alike.    The good news for Romney is that foibles abroad are one of the last things voters take into account.

President Obama had a July 2008 trip abroad that went off far more impressively than Romney’s.   Unlike Romney he visited a large variety of countries in the Mideast and Europe.  It didn’t do much for Obama at home – his numbers were dropping even as he was sailing high overseas.   Still, Obama’s was an audacious sweeping trip meeting numerous world leaders and going to places he might not be popular.   Romney’s was tepid and short – and nonetheless disastrous.    The trip itself may not hurt him, but feeds into an image of the candidate that may be impossible to overcome.

Romney’s summer troubles mean that he’ll emerge from the pre-convention phase more defined by Obama and the media than by himself.   Efforts to define Obama as a failed desperate President, not up to the job and a tad strange at that, haven’t caught on.   People know Obama much more than they know Romney, and generally people like him despite the attacks from the far right.   That doesn’t mean they support his re-election, but they’re not buying the “failed Presidency” line from the GOP.   People realize the economic crisis is global and arrived before Obama was elected.

The core of the problem for Romney is captured by the Newsweek cover – Romney appears insecure and secretive.  A confident candidate would embrace the tradition started by George Romney (Mitt’s dad) who did the unprecedented and released years of taxes when he ran for the Presidency while saying every candidate should do so.   Instead the campaign growls that bringing up Mitt’s dad in a “personal attack” should be condemned.    Except it’s not a personal attack, it’s a call for Mitt to do as his father did!

A secure candidate would explain and defend his record, rather than feign ignorance of what he did for Bain after he supposedly left in 1999.   A secure candidate wouldn’t whine that the media isn’t paying attention to issues he thinks important in the campaign but recognize that in choosing a President we’re choosing a person, not just a set of political positions.   A secure candidate would realize that he has to convince the American people he is worthy of leading the country, not only that he’s a competent businessman who understands economics.    This election is not just a referendum on Obama, it’s a choice.

Many Republicans want 2012 to be like 1980 when Jimmy Carter was whooshed out of office after one term.   They recall how easily Ronald Reagan defeated the President.   But it almost wasn’t that way.   Carter was close or even led in polls until near the end.   The people sized up Ronald Reagan before they choose him, they didn’t just vote out Carter.   Romney’s challenge is to make a convincing argument that he should be chosen to lead.

Does Romney want the job enough to open up and show the real Mitt Romney, warts, finances and all?

So far he’s off to a poor start.   He can’t just rely on money and attacks like he did in the primaries.   He has to step up and convince the American people he’s honest, understands their plight, and can be trusted with the office of the Presidency.    He has less than 100 days to do it.   To start he has to release his taxes, explain what happened at Bain, be up front about off shore accounts and his finances, and show the country that he’s not a secretive, manipulative empty suit with an edge-a-sketch approach to winning votes.   If he can’t do that, he doesn’t deserve the Presidency.

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Modell Deutschland

The term “Modell Deutschland” was coined by the Social Democratic party for the 1976 election campaign: Germany as a model economy.   Europe and the US had endured a recession in 1974-75 that had a whiff of the deeper recession that would come in the early 80s — stagflation, an oil shock, and high unemployment.   In Germany, however, Helmut Schmidt’s Social Democratic party managed to handle the recession with aplomb.   Germany fared well, and in fact the Social Democrats expanded worker co-determination (giving workers a say in how companies are run, and seats on the boards of directors).

Based on this New York Times piece, the phrase still fits, this time with Angela Merkel’s Christian Democratic party.   Germany’s success so far in handling the recession even while paying the lions’ share of bailouts for Greece and Ireland is the envy of the industrialized world.   While Germans themselves grumble about the difficulties of the Euro and trying to keep the economy going during a global depression, they’ve managed to keep growth going and out perform most other countries.

Chancellor Angela Merkel (CDU – the right of center Christian Democratic Party) was in a “grand coalition” with the left-of-center Social Democrats when the crisis hit in 2008.   Together the two parties passed a balanced budget act, requiring the Bundestag and German Länder (states) to limit budget deficits to .35% of GDP by 2016 and to have them balanced by 2020.   There are exceptions in the case of national disasters and emergencies, but the point was clear: there is German consensus that debt has to remain under control.

Most economists are uncomfortable when debt to GDP ratios rise above 60%.   By that point increasing the debt does little to stimulate the economy (and actually becomes counter-productive when you get to about 100% of GDP) and creates long term damage.   After getting budgets under control by 2007, the recession pushed them back up over 70% of GDP.   Given that 60% is the proscribed (but ignored) Eurozone limit, the high debt level was embarrassing.    The Germans wanted to send a clear message that this was short term, with both the left and the right united in vowing to cut debt moving forward.

President Obama urged the Germans to pass a stimulus in 2009 to help get the European economy going.  Merkel, a physicist by profession, simply could not see the logic in Obama’s view.   While the US with the dollar as a global reserve currency and massive economic clout might be able to get away with debt to GDP ratios nearing 100% (though she had her doubts on that too), it would be reckless for Germany to take that approach.  Instead, after securing re-election and joining the FDP in a new center-right coalition, her government passed an austerity program at home, even as it had to pay to help the Greeks and Irish.   Merkel was hesitant to help (her hesitancy was criticized as making the situation worse), but it’s hard to tell your own citizens to take cuts while paying for countries that had little economic discipline.

Merkel’s program was what Obama would call balanced — revenue increases and spending cuts.   However, the Germans did things differently than the Americans.   First, they weren’t driven by ideology.    You didn’t have people condemning government “as the problem” and trying to blame either the right or the left for the situation, making it a political football.  They approached it rationally.

There is a recession.   The debt is too high.   Our demographics show our population is aging.   It is a part of Germany’s moral and ethical character to have a stable social welfare system that guarantees health care, helps the unemployed and assures that the elderly do not suffer.   It is essential for Germany to educate its children well in order to compete in the future.   How can we make reforms that allow us to adapt to the recession, cut debt, but not endanger our population and our social welfare system?

The answer, of course, was to look at their spending and determine where there were inefficiencies, what areas could be cut, and to set priorities.   Yes, a modern industrialized state without a quality social welfare system may be barbaric, but you can’t allow social welfare programs to remove incentives to work, to cost more than the people can afford, and undercut rather than support social solidarity.     Of course, cuts aren’t all it takes – when you’ve got debt, you also have to increase revenue, so taxes had to go up.   This also was done pragmatically — rather than just a “tax the rich” vs. “taxes or evil” debate, they had to figure out how to raise revenues in ways that didn’t hurt the economy or create inequities.

Tax increases are a less harmful way of reducing debt than spending cuts.   Spending cuts slow the economy more than a tax increase.    But too many taxes alongside wasteful spending creates a lose-lose situation.    These are not decisions for ideologues or political pontificators, they are decisions to be reached with a cool rational eye on the facts.

To be sure, Germany has advantages.   It does not have the gap between the rich and the poor that the US has.   While America’s middle class has had stagnant wages the last thirty years, all Germans have seen consistent income growth.   While the gap between the rich and and poor has been growing here, that hasn’t happened in Germany.  There are still people who are very rich, and there are poor people — and there are incentives to innovate, produce and invest.  But the power hasn’t shifted completely to the wealthy elite.    Strong labor unions especially assure that more equitable relations are maintained — business and labor have more a partnership than separate classes.   Germany proves that those who hate or demonize labor unions are misguided.

Germany also avoided the housing bubble, even if many of its banks invested in dubious CDOs.   Germany’s financial and economic sectors are heavily regulated, and therefore resist the kind of wild fiascos that engulfed Ireland, the US, Iceland, Spain and all the others who believed the 1990s myth that de-regulation was good and the ‘market gets it right.’   A good strong regulatory regime has helped Germany stay afloat.

Finally, Germany didn’t let it’s industrial sector die off in the last recession like the US did.  While the US went towards service industry and financials — producing less and consuming more through debt — Germany maintained a current account surplus (consumed less than it produced), and supported its industrial base.   That means that Germany lacks the huge imbalance the US suffers; the US has been living beyond its means, for the most part the Germans have not.

Germany has challenges — if you talk to Germans they’ll be vociferous in the need to still reform the health system, concern about the Euro, worries about high subsidies to industries, etc.   There are ideological differences between the left and right, though not usually pitched in the emotional ‘good vs. evil’ way of American politics.   There are vast differences between the US and Germany, and the US does do many things better.   Still, given the situation, there’s a lot we can learn from “model Germany.”

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Surreal America

The argument that the US is heading for collapse is probably overstated, but sometimes when I look at the nature of political debate in the US it seems plausible.  Rather than taking a cool, pragmatic view of the problems and potential solutions, politicians are increasingly locked in an ideological fog, looking for sound bites and “easy” solutions.   Rather than recognizing the complex array of problems that brought us to this point they prefer to point to some villain who has foisted harmful policies on the US which, if eradicated, would eliminate our problems.

For instance, it’s become mantra for some on the right to see unions as some all powerful bad guy.  The proposition is so absurd as to be laughable.    As this story shows, US workers are lower paid than ever.   One reason is that unions have become impotent and are smaller than ever.   There is no possible way to deny the fact that relative income has shifted away from workers (who have gone from ‘middle class’ to ‘working poor’) towards the wealthy, and that unions have become rare and ineffective.   This is a problem.   With the working class increasingly receiving less income, not only is the divide growing in the US, but economic growth becomes more difficult.   Companies are earning record profits as worker income declines.

If people were rational and objective, they’d see this and come to the obvious conclusion:  corporations and businesses with resources are structuring the game in their favor (and the favor of their share holders) while workers, no longer protected by effective unions, pay the cost.   Instead, driven by irrational ideological faith, many argue that unions are evil and holding back growth and that the government is unfair to big business.    Morever, it’s clear that the wealthiest have had an explosion of income growth in recent years, while the poor and middle class have not.   An objective, rational analysis would say that given high debt and deficits, those who have benefited so much at the expense of others should pay more taxes.  Instead, efforts are underway to cut taxes on the wealthiest and cut services to those poor who have become worse off in the last 30 years.

As I noted yesterday, the argument that these policies trickle down wealth to the poor has been discredited.   Europe, which has stronger labor unions and more wealth equality has also created more jobs in the last 12 years than has the US.   We’ve seen a net shift of wealth towards the already wealthy.   Moreover, there is little class mobility in the US.   It’s not as if the successful are rewarded for hard work and innovation; rather, those with wealth are being rewarded for having wealth.

What’s surreal about this is the way that especially the right in the US ignores the data and continues to argue for tax cuts while demonizing labor unions.   There is no evidence supporting such claims, such views are driven solely by ideological propaganda.    But the left is not without blame either.   Their focus has been increasingly on politically powerful interest groups, meaning the working poor are often left out.   Moreover, they’ve ignored the problem of higher debt and ineffective social welfare programs, giving ammo to the right to show the problems of big government.

In short, the left has been AWOL in terms of truly identifying and offering solutions to the problem of this loss of wealth, status and opportunity of the working poor, defending instead existing government programs.    After all, what political clout do the working poor possess?   They won’t win elections for the Democrats, and defending them only gives fodder to the GOP to scare the wealthier into thinking Democrats want to “transfer wealth” to the poor.

Transferring wealth won’t work.    The problem is not unequal outcomes, but warped opportunities and power structures.   Corporate profits shouldn’t skyrocket while worker income plummets.  There needs to be more fairness in the structure of pay and power in the market place.   This doesn’t call for massive government transfers of wealth, but rather government support of labor unions, transparency in the market, and regulation of big business.   The goal is not to combat the free market, but to make it work effectively.

That’s the most surreal point of all.   The free market has not been working well in the US because it’s been manipulated by insiders with information and power to control how it functions.   The state is supposed to prevent that and protect the market, but increasingly both parties listen to lobbyists representing the current “winners.”   Left unchecked, this will lead to a bifurcated class structure in the US and a potential backlash.    Left unchecked, the US will lose out to others in the global market.   Republicans and Democrats should together recognize the problem; instead, ideology trumps pragmatism, and problems go unsolved.

It feels like I’m watching a great power decline, even though there are ample opportunities to change and regain vibrancy and growth.    Yelling at each other and lost in ideological fog, those opportunities are ignored.   Instead of problem solving, opponents are demonized in a weird effort to pin problems on a particular group.   The way some Republicans talk about “liberals” — as if all the problems the country faces are caused by ‘liberals’ — is dangerous.   Rather than seeing problems that need solutions, others are demonized and uncritically blamed for all that is wrong.

As someone who is critical of both the left and the right, and who believes that pragmatic solutions require compromises from each side, I hope the surreal political debate gives way to more rational, practical, problem solving.  If not, then perhaps the best days of America are behind us…or at the very least, will take awhile to return.

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Wisconsin Backlash

When Governor Scott Walker took on labor unions in his budget fight with Democrats earlier this year, he got more of a controversy than he bargained for.  Not only did the unions agree to cuts, meaning that limiting their collective bargaining rights was not required to deal with the budget shortfall, but Democratic lawmakers left the state to deny the Wisconsin Senate a quorum to pass the bill as a budget bill.

The Republicans could have (and in retrospect I suspect they wish they would have) right away separated it as a provision standing on its own and passed it, but that would make it clear that it wasn’t necessary to handle the budget crisis and be an overt admission that the goal was to punish and weaken unions.   Instead they decided to criticize the Democratic Senators for not doing their job, and try to pressure them to return to Madison.

The Democrats and labor unions used the resulting delay in passing the law to mount massive protests.   This got scathing criticism from Governor Walker and Wisconsin Senate majority leader Scott Fitzgerald, who not only ridiculed the Democrats, but fined them, stopped their staff from being able to use office equipment like capital photocopiers, and ratcheted up the rhetoric.  The Democrats responded by trying to play “Wisconsin nice,” saying they were seeking compromise and respectful dialogue.   They said they left in order to force some time for discussion about the measure.

Frustrated, the Republicans wore their anger on their sleeves as Democrats mounted protests and put pressure on the Governor to compromise.  He refused to back down, and this gave the Democrats time to motivate their base and to paint Scott Walker as someone unreasonable, so focused on fighting unions that he refused to engage in dialogue and discussion.   A prank phone call and leaked e-mails made the situation worse.   Ultimately, the Republicans separated out the union portion of the bill so they could pass it, and the Democrats came back.   Because the GOP passed the bill quickly, not following Wisconsin open meeting laws (so the Democrats maintain), the law is now in limbo, held back from being made law until legal proceedings move forward.

On Tuesday the Republicans paid a huge price for their refusal to compromise and their inept handling of the crisis.   Joanne Kloppenburg defeated incumbent David Prosser for a seat as justice on the Wisconsin Supreme Court.  Prosser, a moderate and respected Republican was Chief Justice and apparently coasting to re-election when the budget/union controversy hit.   Unable to stop the bill from being passed, Democrats turned their sites on a valuable alternative — defeating a conservative Supreme Court justice and shifting the balance of power from 4-3 in favor of conservatives on the court to 4-3 in favor of liberals.

Kloppenburg won by a margin of only 204 votes meaning a recount is certain and it’s possible (though not likely) that Prosser could still eek out a win.   Still, without this controversy Prosser’s victory would have been a foregone conclusion.  Instead loads of money flowed into both sides of the campaign and it became a test of Governor Walker’s actions.  To be sure, Prosser got a lot of support from people who disagreed with Walker — 30 years in state politics as a respected legislator then Judge earns support and respect — but that only makes the victory more significant.  It shows that the Democrats in Wisconsin are motivated, and the Republicans may have over-estimated their power when Governor Walker and Senator Fitzgerald took on this fight.

There will likely be recall elections later this summer trying to replace Senators on both parties, and it will be interesting to see how those play out.  But clearly losing Prosser’s seat on the court and the conservative majority was not a price Governor Walker expected to pay for his uncompromising effort to weaken unions.   Democrats now feel they have the wind at their back heading into 2012, as well as a court more friendly to legal efforts to fight the law.

One can argue that a Supreme Court justice race is the wrong place for such symbolic politics to play itself out.   Perhaps, but once you make something an elected position the only real goal is to motivate voters, and in this case the union controversy overshadowed arguments on legal credentials.

Democrats can find hope that there is still a base out there that can be motivated and get out the vote.    The Republicans may be over reaching not only in Wisconsin but in other states and in Washington.   The public didn’t elect them to get tea party policies implemented, but out of dissatisfaction with Democratic policies and President Obama’s first two years.   Republicans in Wisconsin rode a wave to large victories in November but find themselves on the defensive in April.  Political winds shift suddenly.

Republicans nation wide can take solace that this is only in Wisconsin, and is taking place early in 2011.   But the message is clear: push too hard and be too intransigent and the public can turn on you quickly.  The same voters who overwhelmingly voted Democratic in 2008 aren’t suddenly tea partiers whose “eyes were opened” by Obama’s policies.  Most independents don’t like extremes left or right, the center is still where the votes are in the American electorate.

National Democrats will find it easier to play for the center in the next year and a half.  They can’t get anything passed anyway, so pushing for some major controversial reform makes no sense at this point.  If they make some strategic compromises, and if the Republicans find themselves unable to resist tea party pressure, the pendulum of politics may swing back in their favor in 2012.   This adds to the pressure on Speaker Boehner to show that the Republicans are not ideological extremists — Americans want pragmatic problem solving, and independents prefer that the parties work out compromises.   They’ll reward those they trust not to be too extreme.

The lessons from Wisconsin will no doubt be debated and analyzed by both parties in coming months.   One thing is clear: the 2012 elections will certainly offer another fascinating and exciting episode of political drama.

UPDATE: It appears the incumbent may have eeked out a victory after all.   New votes were found for Prosser in the strongly GOP Milwaukee suburbs, meaning that the fight probably did not cost the Republicans the balance of power in the state Supreme Court.  Still, the fact it was this close underscores the volatility of American politics at this juncture!

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Republican Overreach?

Being an international relations person, my focus has been on Egypt, Libya and the price of oil for the last few weeks.  I’ve noticed domestic politics out the corner of my eye, the protests in Wisconsin, and a push to eliminate or curtail collective bargaining rights for public unions.  Although being a member of a public labor union (AFUM, associated with MEA/NEA) and a campus local President, I’m not yet emotionally engaged in the issue, and I think just as the Democratic push in 2009 caused a swing the Republicans last year, the GOP is set to help the Democrats out with an overreach of their own.

The narrative reads good for Democrats.  A Wisconsin governor says there is a budget crisis and the state is broke.  There are budget issues, but the state isn’t broke — and its Republican policies that helped cause the short fall.   However, blame is placed on public unions — teachers, snow plow drivers, state workers — and because they won’t allow cuts to their benefits and pay thanks to tough union contracts, the unions must be defanged to save the budget.

But, they are willing to make cuts.   They and the Democrats will agree to the budget absent the language sharply curtailing their collective bargaining rights (saying unions can only negotiate raises up to a cost of living increase, cannot negotiate benefits).   In short, the GOP could claim victory in Wisconsin at a low political price — the unions caved and Scott Walker could at this point have presided over winning a huge budget battle.

But he didn’t.  It wasn’t really about the budget, it was about going after unions.   Public unions give a lot of support to Democrats, and if they could be cut to size (Walker compares it to the air traffic controller strike when Reagan broke PATCO) then presumably the Democrats would lose money and support.  Republicans retort that the whole controversy is a sham, created by the fact the Democrats left the state and aren’t doing their job!  Of course in 1840s none other than Abraham Lincoln leaped out of the capital building in Springfield, IL to prevent there from being a quorum.   And Lincoln is revered by Republicans as having been the first Republican President.

Politically, the issue is energizing Democratic constituencies across the country, and as Obama does things like refusing to defend DOMA which the DOJ has deemed unconstitutional (they’ll still enforce it, just not defend it in court) and sides with Labor in a very emotional and visible stand off, the fear that Obama’s base won’t be motivated in 2012 is slipping away.  Nothing like a Scott Walker like character (with provocative quotes from a prank call even) to energize the base.

The Democrats also have to be pleased with another emerging story line.   The Democrats blame Wall Street, big money, big banks, and the wealthy for the problem, and want them to pay just a little more tax dollars to help the budget come into balance.   This alongside a plethora of growing publicity to the increasing size of the gap between rich and poor, with the middle class disappearing, works to the Democrats favor.  Now when the Republicans charge them with “class warfare,” they’ll point to the war being waged on teachers, and a host of public employees, many with tough blue collar job.  Which war is more just?   Attack the teachers but protect the rich?

As Republican Governors go on record cutting benefits and reducing regulations protecting the environment and consumer rights, while the House of Representatives has to make concrete budget cutting suggestions, the Democrats will have a lot of ammo to use against the Republicans in 2012.   Probably not enough to take back the House or have the kind of year the GOP had in 2010, but probably enough to hold the Senate and allow President Obama to win a second term.   The political winds are shifting again, and the way it feels is much like it did in 2009 when the GOP base started to get angry about Obama.

The economy is the wild card, of course.  If current trends for job growth and reduction in unemployment continue, things will look very good for the Democrats in 2012.  If high oil prices cause another recessionary dip, President Obama will have a real fight on his hands to win re-election.

I will post more soon about the role of public unions, and call on my own experience as a guide.  For now, however, as I focus on Libya and throw quick glances towards Wisconsin, I’m sensing a counter-tea party brewing.    The electorate in 2012 will be browner, more Democratic, younger and more diverse than it was in 2010.   The Democrats took their lumps in 2010 and will have to deal with the consequences of losing big for the next two years.    Some of these consequences may be far reaching.   But one consequence may be to help the Democrats politically in the 2012 elections.

UPDATE: Rasmussen, a polling agency usually with a slight GOP/conservative tilt, finds Scott Walker in trouble in Wisconsin, with over 60% disapproving of his job performance.  This is a strong sign that even if he wins this battle, he is likely to lose the war.

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Unions in America

One of the papers in the panel I participated in today followed media coverage of the recent effort to pass ‘card check’ for union organization.   The presenter, Dr. Glenn Richardson, showed how despite the fact that there were numerous examples of abuse by management, including intimidation of those who favored unionizing, the discourse around the issue tended to be dominated by images of “union thugs” intimidating workers.

However,  while there was a lot of evidence of employer intimidation, there was no evidence of union intimidation, even in card check certifications.   Moreover, the right supported its favorite option, secret ballots, by wrapping it in the guise of fundamental American belief in the secret ballot as essential to democracy.   The problem, of course, is that while employers do lobby employees, often with one on one meetings, threats to shut down if the company unionizes and other forms of intimidation, the union doesn’t get the names of the people who will be voting, and cannot effectively communicate with them.   Therefore, its not truly a free election, it favors the employer.   He noted numerous examples of this happening, even as the ‘union thug’ narrative (for which there was really no evidence) stuck in the media discourse.

Anyone who has lived in or studied European economies will notice two stark differences between Europe and the US.   First, the US has a much larger gap between the wealthy and poor, with workers getting much less vacation time and fewer protections.   They can also much more easily be fired (often for things like supporting unionization).   Second, labor unions are extremely weak and irrelevant in the US compared to Europe.   White collar unions are very rare in the US, but extremely popular in Europe.

The result has  been a massive shift of wealth from workers to business owners and stock holders, including a loss in relative wealth by white collar workers.   Without unions standing up for workers, they are increasingly unable to fight for better pay and working conditions.   In fact, when things go bad, like GM needing a bailout, often the unions get blamed for bad decisions from executives.   Given that so much damage was done by the collapse of the financial sector due to unregulated derivative trading, blaming unions seems obscene.

Why has America turned hostile to unions?   I think it’s a mixture of both discourse dominance by those hostile to unions, and the ability of high debt and cheap imports to keep workers believing unions aren’t needed.

The discourse control is obvious.   To disclose my clear bias, I am campus local President of AFUM, a union affiliated with the NEA (and Maine Education Association).   That means I am part of a rather powerful white collar union.   I do not agree with every position the NEA takes, but recognize that it works hard to protect educators.   Moreover, our dues cannot go to fund NEA political action, to support that we have to make separate contributions.

Because there has been corruption in unions (as in every major organization) and at times union deals have seemed to render extremely high salaries in times of plenty, unions get painted as “thuggish” corrupt organizations whose demands can destroy industries.   Unions are thus considered enemies of capitalism and markets, even though the idea of workers organizing to negotiate with employers is not anti-capitalist in any sense of the world.   These images are created with anecdotes and images of unions being power hungry and greedy.

The reality is far from that.  My union, for instance, just signed a two year contract with no salary increases for the first time ever.   The University system basically showed its books, worked with the union, and convinced us that it was really impossible at this time to afford raises.   Together, the system and the faculty want to show that we are working to keep education costs down and help solve the states’ financial difficulties.  In the airline industry, auto industry and everywhere unions are, there is a long history of even taking very large cuts in salary to protect the long term business.   Unions don’t do that if they don’t believe the cuts are truly necessary — but no one wants the jobs to be lost.

The people with the real power in the relationship are the employers.   Often they convince low paid clerical workers that their interests are with management.   White collar workers want to see themselves as above the grunt on the industry floor, so even though they’re really just doing glorified grunt work with a white collar, they view themselves as superior.   Thus the pay differential between upper management and so called low management is immense.   Without union protection, no one is fighting for better benefits, standing up for employees who have a grievance against management, and working to make sure that when profits are high, a fair share goes to the workers, not just the big shots.

The second point is that this discourse was sustained in part by a massive growth of cheap goods and people living in credit and appreciating home values.  This was an illusion, but it helped reduce dissatisfaction people had with their pay.   With unemployment low, most people had jobs and could be convinced that unionizing would be risky.

But the lack of unionization has contributed to the massive gap between rich and poor, one that makes the US almost seem to be more like a third world nation in the distribution of income than an advanced industrialized state.   I did a good two hour “urban walk” in downtown Chicago this evening, noting the stark differences between the ornate buildings and numerous homeless and poor shuffling around asking for spare change.   The real victims, though, are the working poor who toil with little pay, and often no insurance benefits or guaranteed vacation.

Some justify this by saying that’s what the market result is.  The Europeans are lazy to have five weeks paid vacation.   Bullshit.    You can darn well bet that those who really make out well in our system can get five weeks vacation easily, and spend it traveling and enjoying a fine lifestyle.   The market created this vast maldistribution of wealth only because it could be dominated by and manipulated by those with the wealth and control of both jobs and political messaging.

Stronger unions would be a market friendly way to address this.   It wouldn’t be welfare or socialism, but a way to give workers a stronger voice, to have a chance to really investigate how much a company can afford to pay, and reduce the vast discrepancies between management and worker pay.   It can forge a partnership between management and worker, whose destinies both benefit when a company does well.  Stronger unions would help us get through this time of economic hardship while trying to prevent the worker from bearing too much of the cost.

It’s not going to happen.   The discourse is fully entrenched in the “unions as corrupt thugs wanting to destroy business” narrative.   Unions are easily demonized, and few politicians see a lot of advantage in praising them publicly.    When unions want fair pay for workers, they are accused of class warfare.   Few accuse the big CEOs who get fired and collect tens of millions on the way out of class warfare.   But whose work really earned all that money?   Unions could bring about a fairer negotiation to help capitalism work better, and also show how “free trade” with countries that use virtual slave labor may make it appear we get cheap stuff, but that this is just exploiting foreign workers and weakening the position of American workers.

To be sure, I do prefer the German and Scandinavian notion of unions as partners with business rather than the British and often traditional American idea of them as adversaries.   The goal is to help make markets function justly, not to destroy them or hurt business.   However, I suspect the anti-union rhetoric will not go away any time soon.

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