Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

25 January 2013

Two Principal Posts

This frame is unusual for this blog. It has two principal posts and one minor one, as follows:

Real Incentives for Private Job Creation
How Karl Rove and Frank Luntz Destroyed the Republican Party
John McCain (and Arizona) at the Crossroads

Real Incentives for Private Job Creation

Has anyone besides me noticed a funny thing? Now that the campaign is over, neither party is talking about jobs.

Republicans are obsessed with reducing debt, despite being responsible for the lion’s share of it. They see our debt as a golden opportunity to realize their near-century-long dream: chipping away at Social Security and Medicare.

Democrats (at least the President) are turning their focus to long-term goals like slowing global warming, and to fixing our longstanding immigration problems, which might actually be fixable now. (While denying that global warming even exists, the GOP is not averse to working on immigration. It is slowly discovering that, with universal Hispanic disdain, it will be a permanent minority party.)

Part of the reason for this rapid shift of focus is that the global economy seems to be healing all by itself. But sometimes it’s smart to address problems when they are no longer so urgent—like saving for a rainy day when you are flush. That’s what competent economists recommend we do with our debt: wait until economic recovery is undeniable and then start reducing it.

The GOP has suggested that reducing the deficit will, by itself, create jobs. Hence Boehner’s campaign mantra “job-killing taxes.” But as I explained in a previous post, taxes create jobs, too. They just create jobs in government, not the private sector.

To the people who have them, government jobs are just as good as private-sector jobs. And just like private-sector jobs, they put money in people’s pockets, stimulate demand, and increase economic activity. Unless government jobs come to dominate our economy, as in Greece, the GOP’s preference for private-sector jobs is an ideological choice, not an economic one. We are a long, long way from that point.

The GOP is right about one thing. Raising taxes just to pay past debt doesn’t create jobs. But it doesn’t kill them either. It does improve our credit rating, lower our debt overhang, give us more financial flexibility, and (if done right) produce a more equitable society.

Anyway, cutting government spending doesn’t create private-sector jobs by itself. It just throws people out of government jobs, puts less money into circulation, and lowers demand for the private sector’s good and services. States like Michigan, Ohio and Wisconsin saw that happen in real time under GOP rule recently. That’s one reason why the President won. (Has Boehner learned this simple economic lesson? Doubtful, but stay tuned.)

In order to create private-sector jobs, you have to induce private investors to do so. Duh. How do we do that?

For as long as we’ve had an income tax, we’ve tried to use tax rates to encourage constructive private behavior and discourage excess and waste. Those are the purposes of the difference in tax rates between so-called “ordinary income” and “long-term capital gains”.

I explained in detail how this system works in a previous essay. People often use the shorthand term “capital gains” in speaking of taxes. But what they really mean is “long-term capital gains,” or LTCG.

Our tax law now defines LTCG as gains from capital assets held for more than a year. With some minor exceptions, gains from assets held for a shorter time are taxed at the same rates as “ordinary income,” or OI. OI includes things like wages, salaries, professionals’ fees, and ordinary business profit.

We have taxed LTCG at lower rates than OI since our income-tax system began. Although not always the same, the difference applied (and applies) equally to personal and corporate taxes.

The idea is simple and sound. We should tax individuals and corporations more lightly when they put their money into productive assets, rather than excessive personal consumption or corporate waste. The “long term” requirement of more than one year was supposed to distinguish between productive investment and the less desirable uses of money.

At times, the difference in rates provided a powerful incentive for capital investment. But recently we’ve diluted the difference. The following table shows how:

Differences between Top Personal OI and LTCG Rates
YearMax OI RateMax LTCG RateDifference

The first row of this table, for 1954, shows how powerful an incentive for LTCG investment we had in our postwar boom period. The difference between the two top rates was 66%—not of the rates, but of the amount taxed. Rich people and big corporations could save two-thirds of their taxes by making money from LTCG. That huge benefit really focused their minds!

The difference is much smaller today, and the corporate and personal rates differ slightly. But the purpose of the difference remains the same: driving money away from excessive personal consumption and corporate waste and into productive investment.

The problem today is that the conditions for applying the more favorable rate are outmoded. They no longer address those goals well.

In my previous essay, I focused on the investment duration required to get the more favorable rate: more than one year. Our public companies run on quarterly reports, and we consider a one-year investment “long term.” China runs on five-year plans. If you knew nothing else about our two societies, you would conclude that China would win.

Our tax law doesn’t even seem to know the real meaning of the phrase “long term.” So I proposed lengthening the investment period, perhaps to five years, and lowering the favorable rate, perhaps to zero, to provide a powerful tax incentive for genuine long-term investment.

But an even more important thing is wrong with our LTCG tax policy, which my previous essay didn’t discuss. Our definition of “capital gains” for tax purposes is much too broad. So our tax-rate differential encourages all sorts of activities that are non-job-creating and non-productive and may actually be harmful.

For example, suppose I buy a house for investment, make absolutely no improvements in it, hold it for a year and a day, and flip it for a profit. I still get the favorable lower LTCG rate. The same is true if I buy a share of stock in Apple or Exxon-Mobil. My “investment” doesn’t even go to the company; the investor who sells the shares to me gets it. But I get the lower rate just for holding the shares for more than a year.

In either case, I have made a speculative investment that doesn’t create a single job. Worse yet, it might be helping inflate a speculative bubble, which might lead to another Crash. Yet Uncle Sam encourages me to do these things with a favorable tax rate. He rewards my non-job-creating and perhaps bubble-inflating activity with a lower tax rate than on the fruits of my productive labor.

Why? The too-short holding period of the current LTCG law is not its only problem.

Consider another approach. Suppose we could find a reliable way to define a “job-creating long-term capital gain,” i.e., a gain from a business investment that actually creates jobs. Suppose we could extend the holding period to qualify for lower tax rates from one year to five. And suppose we could boost the tax incentive by reducing tax rates on these capital gains to 10% or even zero. Then wouldn’t we be back to the original policy and effect of differential rates, with a focus on our now most important national economic policy, private job creation?

Politically, this change might require some heavy lifting. It wouldn’t have much practical effect without also raising the tax rates for speculative, non-job-creating capital gains. At very least, we would have to offer a lower tax rate for job-creating capital gains than for non-job-creating and speculative ones.

So Congress and the President would be in a knock-down, drag-out fight with the hedge funds and the trading and speculative parts of the finance industry. But parts of finance sector would benefit. Venture capitalists wouldn’t have much trouble showing that the new businesses they finance create jobs. Ditto underwriters for initial public offerings, except perhaps those rare ones designed just to retire corporate debt.

That part of the housing industry that is now buying up distressed homes wouldn’t be hurt. It could qualify for the new treatment in two ways. If it rented the houses, it would be creating jobs for rental agents and property managers. If it improved the homes before reselling them, it would create jobs for construction workers, painters, remodelers, and interior decorators.

Properly designed, the new tax rates might attract powerful support from those parts of the finance industry actually involved in capital formation, rather than mere trading and speculation.

Anyway, the theory of this change is compelling. Rich people and big corporations are sitting on mountains of cash, biding their time, waiting for better investment “visibility.”

Investing in new job creation is always risky. It’s even riskier when the global economy is uncertain in the aftermath of the Crash. Speculation, while also risky, requires less effort, less thought, and much less long-term planning.

So speculation—not real capital formation—has become the dominant activity of our finance sector. A few years before the Crash, our finance sector accounted for 41% of all US business profits. It didn’t make that kind of money making loans to small business.

If we want to encourage private investment in jobs, rather than speculating, we’re going to have to provide a wiser and stronger differential tax incentive. A differential as high as the 66% of 1954 may be politically impossible today. But any step in the right direction will help heal our economy and encourage us to do what we need most: create new businesses with new jobs for the long term.

This idea is self-evidently a good one. John McCain proposed something like it from the GOP side as candidate for president in 2008. But he had so little credibility on economic matters that no one even noticed. Isn’t it time that someone with credibility and political skill, like the President, took the ball and ran with it?

How Karl Rove and Frank Luntz Destroyed the Republican Party

One of the many canards you hear today is that Democrats and Obama supporters want to destroy the Republican party. Not so.

Anyone who understands our history and politics knows we have a two-party system. An effective opposition party is an essential element of our government.

Thinking Democrats would love to have an effective opposition party to work with, and to oppose. But they don’t and they can’t. What they must deal with instead, in both Congress and in the States, is a collection of single-issue extremists and obstructionists that resembles a mob.

The GOP today has no agenda but using debt as an excuse to destroy government. Once we have a credible solution to the deficit, it will have no agenda at all. It will only have fear and hate—of the President, minorities, foreigners, immigrants (especially Hispanic ones), gays, Muslims, the Chinese, the Russians (still!), and anyone who doesn’t go to church regularly, preferably to the same church as the speaker.

I have written a whole essay on this point, so I won’t belabor it. This essay is about how the GOP got that way.

Two men—Karl Rove and Frank Luntz—are responsible. Rove’s role became apparent over five years ago, as I noted in two essays (1 and 2) then. Luntz’ role is just now becoming apparent, with his elevation from secret advisor to occasional columnist in the Washington Post.

These two men’s implements were different but were equally effective tools of destruction. Karl Rove taught the GOP that fear and hate were its tickets to victory. Then he went out into our grand land and fomented both, precinct by precinct, with mathematical precision and scientific demagoguery. He is a man of distinction of sorts: he was the world’s first demographic demagogue.

Frank Luntz was more general. He taught (and still teaches) the GOP to connect with voters’ guts. Turn the gut, and the mind will follow. You can do anything as long as the words you say hit the gut the right way. That’s Luntz’ message. (If you don’t believe this, read his latest recommendation for putting lipstick on a pig.)

Of course emotion is a part of politics. But so is policy. The GOP’s problem is that Rove and Luntz have led it so deeply into voters’ guts that Republicans are now a species of intestinal bacteria. Unless they manage to get something together on immigration, which apparently they are trying to do, their last remaining coherent plan will evaporate with deficit reduction.

While focusing on voters’ guts, the GOP has utterly forgotten, or utterly neglected, the policy principles for which it has stood from its founding. And in many cases the fear and hate that these men incite are at war with those very same principles.

Let’s enumerate them and see.

Remember Lincoln? He was the party’s founder. He started the Civil War just trying to preserve the Union. He ended it by freeing the slaves. With the passage of the Civil War Amendments to our Constitution (Thirteenth through Fifteenth), Lincoln’s successors made real Jefferson’s credo—“all Men are created equal.” So the GOP’s founding principle appears to have been equality.

Now fast-forward to today. Beginning with Nixon’s Southern strategy, the GOP has made a two-generation electoral career of demonizing African-Americans as inferior, dangerous, crime-causing freeloaders.

First there were the “welfare queens,” invariably described as black single mothers. Then there was Willie Horton, who helped put the Senior Bush in the White House. Next there was Bob Corker’s famous “Call me!” ad that played to the basest gut fear of all: black men taking white women. Finally, there was the 2008 campaign, in which the GOP tried to portray a mild, cautious, cerebral, centrist presidential candidate as a Marxist, socialist, Nazi, terrorist and Kenyan agent, who wasn’t really an American citizen at all. (And don’t tell me these canards were not “official;” Boehner and others never repudiated them, although repeatedly asked to do so. Instead, they coyly smiled, winked and nodded and signaled their “reluctant” accord.)

The GOP has done much the same thing with undocumented immigrants, who are mostly Hispanic, as well as gays, Muslims and atheists. In public—and for broader audiences—Republicans insists that they are not racists, Hispanophobes, Islamophobes or homophobes. They regularly pay lip service to equality and equal opportunity.

The official words feign acceptance and tolerance. But the music is all rejection, anger, belittlement and jeering.

Whom do they think they’re kidding?

Americans are not stupid. The first thing we learn growing up is, “watch what they do, not what they say.” The GOP cannot expunge the stain of consistently racist electoral tactics and strategy with lip service and powerless tokens. That’s why it lost every non-white and non-Christian ethnic group by landslide proportions, from Asians to Jews. Lincoln would not be amused.

Intolerance is just the beginning of the GOP’s betrayal of its founding principles. Remember when Democrats were the “war party”? I do. The GOP used to stand for using economic pressure and threats, but for treating war as the final last resort it ought to be. Ike helped win World War II but ended up warning us of the dangers of an unrestrained military-industrial complex. The greatest general-politician in our history ought to know.

All that started to change with Nixon. He got elected president with a “secret plan” to end the Vietnam War, which turned out to be vaporware. During his second term, Daniel Ellsberg published the Pentagon Papers, exposing our government’s massive deception about the war’s cost and lack of success.

If he had been clever and flexible, Nixon could have used that revelation as a reason to change policy and discredit the Democrats who had started the war. Instead, he tried to suppress it. The Watergate scandal, which drove Nixon from office, was part of a massive criminal conspiracy to discredit Ellsberg and the Democrats and maintain support for the war. In one administration—Nixon’s—the GOP morphed from the prudent, cautionary party it had been since its founding to the war party.

It has been so ever since. Bush I started Gulf I for good reasons and had the good sense to follow Colin Powell’s advice and stop outside of Baghdad. So Gulf I was probably the shortest and most successful major war in our history.

But things went straight downhill from there. Dubya had to best his father. So he turned a successful and low-cost containment policy into a disastrous (and disastrously expensive) Iraqi quagmire. And he did it for reasons that turned out to be false. The GOP’s new foreign-policy “intellectuals,” aka “neocons,” goaded and cheered him on every disastrous step of the way.

Then Dubya botched a police action and lost track of bin Laden. So he turned that police action into an invasion of Afghanistan and a war against the Taliban, which had never been our enemy until 9/11. Obama, in contrast, killed bin Laden with ninjas, took out much of Al Qaeda with drones, and is preparing to wind that second needless war down.

“Watch what they do, not what they say.” As candidate, Dubya promised a “humbler” foreign policy and no nation-building—promises entirely consistent with traditional GOP principles. As president, he gave us two needless wars, with about a decade of nation-building in each.

The betrayal of traditional GOP principles goes on and on. The GOP used to be the party of fiscal prudence. Then Dick Cheney told Dubya, “Reagan proved that deficits don’t matter.” So Dubya ran up six trillion dollars of deficits by putting two needless wars on our credit card. Next he granted gratuitous tax cuts to everyone, including the super-rich.

In the last election, the GOP tried to shift the blame for debt to Obama. But that obvious canard didn’t stick. There are still enough people around who remember how the GOP once stood for fiscal prudence and encouraged Dubya to blow it, big time.

Now the GOP once again is trying to paint itself as fiscally prudent. But its words ring hollow. It doesn’t repudiate Duyba’s disastrous policies or even admit his role in ballooning our debt. Instead, it attacks Social Security and Medicare, on which tens of millions of ordinary people rely for security.

Rove and Luntz seek to strengthen that attack by getting voters to fear and hate ordinary working stiffs as freeloaders and “takers.” (Don’t tell me that Romney made up that loaded term on his own! It has “focus group” written all over it.) The same fear and hate preclude rational discussion of strengthening Social Security and Medicare by putting them on a sounder fiscal footing.

People like me might be amenable to that sort of discussion. But we’re not going to go for a ploy that labels the people who built our postwar prosperity “freeloaders.” We suspect, with historical justification, that its goal is not fixing Social Security and Medicare, but privatizing or killing them.

Next, recall free trade. Wasn’t that once a core principle of the Republican party? It still is among vanishing GOP moderates and the GOP’s business wing. But among the Tea Party, it’s anathema. Free trade has become collateral damage in a fear-and-hate campaign against the Chinese, the Europeans and foreigners generally.

Besides undermining the GOP’s once-core policy principles, Rove’s and Luntz’ fear-and-hate campaign has had three big defects. First, it only works for a while. Ordinary, sensible people, which most Americans are, just can’t sustain fear and hate for very long. Eventually, they tire and ask, “what’s the beef?”

That was true even of the Soviets, with their menacing trash talk and Armageddon arsenal. Once the Russians abandoned Communism and the goal of world domination (or world subversion) of their own free will, most Americans forgave and forgot. While they may not like or understand Russians, they don’t consider them our enemies. John McCain’s and Mitt Romney’s atavistic attempts to restart the Cold War fall largely on deaf ears.

The same is true internally. Once voters recognize that one group is not as scary as portrayed, they are quicker to recognize it about another. The Internet helps mightily. It took decades to overcome Nixon’s Southern Strategy and elect a half-black president. It took only a few years for gays to get the right to marry, at least in some states. When people see how harmless and normal is one demonized “other,” whether in person or on a screen, they stop fearing others and start living and letting live.

The President emphasized this steady and inexorable progress toward tolerance and equality in his inaugural address. In so doing, he showed his political genius. Not only is it one of our proudest achievements as a nation—perhaps the proudest. It is an inspiration to the world and is gathering unstoppable momentum.

The next group to feel its benefits will be peaceful Muslims living among us. Whatever they wear on their heads, the tide of equality will wash away the mud of Rove’s and Luntz’s manipulated fear and hate. No one who thinks about it for more than a microsecond wants a “war of civilizations” or, in the nuclear age, a new Crusade.

Many Jewish men wear yarmulkes; some Muslims wear turbans. Orthodox Jewish ladies wear head scarves nearly indistinguishable from those worn by most Islamic ladies, except the most devout. Big deal. Youth, in particular, just can’t understand what all the noise is about. They see the Muslims they go to school and play with as no different from every other group of hyphenated Americans: damn grateful to be here and not in the war-torn hell-hole they or their parents managed to escape.

The second defect of fear and hate is that its targets always fight back. That happens both inside and outside our borders. Inside, Hispanics mobilize against anti-immigrant hatred and policies, and African-Americans support the President virtually 100%. The backlash of fear-and-hate targets gave Obama landslide majorities among every ethnic and religious minority. Peaceful Muslim-Americans will no doubt learn the same lesson and begin to fight back politically.

If the GOP continues its foment-fear-and-hate campaign, it will consign itself to minority status sooner than anyone believes. The strategy is unviable not only because whites (let alone older whites) are becoming a minority. It’s unviable because the YouTube age prevents the GOP from hiding what it is doing. Eventually, the target groups, like the family in the play “Guest in the House,” will all understand what the villain is doing and all unite against her. What happened in last November’s election is just a premonition of that fate.

Foreign targets of fear and hate push back, too. The Russians push back against Mitt Romney’s and John McCain’s retrograde Cold-War rhetoric. The Chinese get nervous about trade-related China bashing. They begin to focus their trade expansion outside the United States. They think about how to promote other currencies as a substitute for the dollar, and how to unwind their investment in US treasuries without causing a panic.

The Chinese are far too smart to promote open conflict. But they are “pivoting” from us just as we are trying to “pivot” toward Asia. So the party whose leader (Nixon) once opened up the West to China is now pushing China away. Meanwhile, the so-called “party of business” is stiffing the world’s second largest economy, at least in its electoral rhetoric.

We live in a flat, multipolar world. It’s an open electronic stage, with open mikes and hidden cameras everywhere. Nothing is secret anymore. A demagogic speech against a foreign country or its people—even in a supposedly “closed” forum—finds its way onto the Internet and into the hands of the putative enemies. In this globalized world, you can’t bash the Chinese in Birmingham or Peoria and avoid unintended consequences in Tianjin.

The GOP ought to know this. Its policies of free trade and globalization helped create the open, flat world we live in. Especially for the free world’s self-appointed leader, the whole world is our constituency. There are no secret precincts or precinct secrets anymore.

Yet Rove and Luntz still act as if you can divide and conquer, by fear and hate, on a precinct-by-precinct basis in the YouTube age. Maybe they haven’t heard of “macaca.”

Finally, fear and hate can have unintended consequences. The false fear and hate that Dubya fomented against Iraq drove a dangerous doctrine of “pre-emptive war.” Our neocons are not the only ones thinking about that. Iraq scared the hell out of Iran, Russia, and North Korea. (Here again, China is far too smart.)

No rational person wants war with North Korea or Iran, let alone China or Russia. Yet the free-floating fear and hate of these nations and their leaders that Rove and Luntz have fomented make war more probable and mistakes in judgment more likely, on all sides. Thinking people understand this point; pols who just want to win at all costs don’t.

The bottom line is that fear and hate are loose cannons. They are not policy; they undermine policy. Yet Rove and Luntz have used them relentlessly as the GOP’s predominant electoral strategy for a generation.

These tactics worked to elect Dubya, but at what cost? He is undoubtedly the stupidest man ever to serve as president, far surpassing “Silent Cal.” So now the Grand Old Party’s last president is a pariah. He wasn’t invited to his own party’s convention, and he didn’t appear at last week’s inaugural. Everyone, Republicans included, would like him just to fade away. But the GOP won’t ever admit he made a single mistake.

So why does the party continue to follow the counterproductive tactics and strategies of Rove and Luntz? Part of the problem may be a huge disconnect between its so-called intellectual “leaders” and its rank and file.

If you listen to GOP pundits like David Brooks or Ramesh Ponnuru, an odd thing strikes you. They are effete intellectuals. They live in an airy, refined and comfortable world of abstract discussions, mutual sycophancy, rich banquets and powerful people. They don’t seem to have the faintest idea of where their rank-and-file followers live, especially the Tea Party.

Maybe they should browse the Internet more often. Maybe they should read the online comments to their own columns. If their onscreen personality is not an act, they would be appalled at the level of paranoia and venom they would find there. The vicious world of fear and hatred they have promoted or tolerated among the hoi palloi is nothing like the effete and urbane one in which they live. If they’re not careful, it may all come back to bite them personally some day.

Ultimately, it all came from Rove and Luntz. If your rank and file followers are acting irrationally, you have to consider the possibility that the fault may be yours, not theirs. The GOP’s intellectual leaders really need to think about that.

So if you want to know what’s destroying the Republican party, it’s not Democrats. It’s Rove and Luntz. It’s the loose grenades of fear and hate that they’ve been tossing everywhere for a whole generation. It’s their notion that you don’t have to have a coherent, positive world view and policies consistent with it; you just have to inoculate voters with powerful intestinal bacteria.

If the GOP wants to become a real party again, it’s got to find something positive and uplifting to believe in. To most Americans, using debt as an excuse to drown government in a bathtub and downsize the safety nets they rely on when old or sick doesn’t fit the bill. Nor does a “war of civilizations” with 1.3 billion Muslims worldwide, nearly all of whom are peaceful. Nor does a trade war with China, an air war with Iran, or a replay of the long-dead Cold War with Russia.

Making government smaller is negative, not positive. Cutting debt is also negative, no matter how much good it will do. Even “liberty” is a negative when it means opposing any law to make our streets less dangerous or our lives better.

The GOP has become like that horrible character in the movie “The Best Exotic Marigold Hotel,” whose husband described her as emitting “a constant stream of negativity.” No one likes an individual like that, let alone a political party. The party has been so negative for so long that it doesn’t even know what being for something means anymore. Hint: being for various wars isn’t positive.

When the GOP turns away from fear and hate and starts thinking positive again, it will be on the mend. It will do even better when it climbs off the mount of effete abstractions and starts working, along with Democrats, on practical measures to better voters’ lives.

One positive thing alone won’t do. The GOP appears to be jumping on the bandwagon of immigration reform. It remains to be seen how it will quell the visceral fear of Mexican immigrants that it has spent several election cycles cultivating. But even if it can do that, a single positive achievement in a phalanx of negativity won’t do. Everyone knows that, after the last election and Dubya’s attempts to speak Spanish, the GOP is desperate for Hispanic votes.

In order to get them and keep them, the GOP has to change its thinking and its outlook, not just its image. It needs to develop its own positive program for national renewal, including immigration. That will probably take it some time.

Coda: Fear and Hate—the Evolutionary Angle

There is a reason why Rove and Luntz chose fear and hate over more positive emotions. They are our strongest emotions.

There’s an evolutionary reason why. Love motivates us reproduce and to protect our offspring. But if we didn’t fear and hate the predator who strove to eat us, or the rival who wanted to take our territory or food and thus our livelihood, we might not have lived long enough to reproduce. Fear and hate reflect the fact that the individual’s survival must precede the clan’s.

So once Rove and Luntz chose to treat voters as Neanderthals and play on their emotions, they had no choice. Fear and hate were their best tools.

The question, of course, is why any politician or political party would want to encourage us to devolve. The complex civilization we have today would be impossible with Neanderthal values. That’s why they vanished into evolutionary history. That’s also why our laws, our history, our literature and, yes, our preachers, emphasize emotions other than fear and hate, notwithstanding their undiminished strength.

In stepping backwards, Rove and Luntz challenged the very foundations of human civilization. That’s why their strategy ultimately failed, and always will—unless some day we wise up too late to avoid species self-extinction, as we very nearly did in October 1962.

John McCain (and Arizona) at the Crossroads

The last paragraph of the first post above reminded me of something painful: all the good that John McCain has tried to do. The memory is painful because there is a chasm between the “old” John McCain and the one that emerged badly battered from battles with Dubya and the President.

During his long Senate career, McCain has worked tirelessly for many sensible policies. They include the campaign-finance law that bears his name—part of which an improvident Supreme Court struck down in Citizens United. They include repeated but unsuccessful attempts to forge comprises on energy policy (1 and 2) and immigration. They also include some sensible economic proposals on capital gains and a housing-recovery proposal that went nowhere because trader Rick Santelli’s popular rant killed it.

McCain’s actions in the field of national security have, at times, been admirable. He was the first person in either party to call out That Idiot Rumsfeld for horribly mismanaging both the Pentagon and our War in Iraq. Without McCain’s early and loud protestation to Dubya, we might never have had Bob Gates, one of the best Defense Secretaries in our history.

McCain’s support for freedom fighters, whether in Libya or Syria, is also admirable. It would be even more admirable if McCain focused on consructive suggestions, rather than just trying to make Hillary and the President look bad. There are lots of us, including this writer, who want to do more to help the freedom fighters but don’t consider the President’s caution and prudence to be mismanagement or misleading, let alone cowardice.

With this history in mind, it’s hard to escape the feeling that, deep down, John McCain doesn’t really like the extremism that his party has adopted as it drifts farther and farther right and becomes ever more mindless and intransigent. He hazes the President like all the Southern know-nothings, but his heart doesn’t really seem in it. Maybe he’s just doing what he thinks he needs to do to avoid a primary challenge from the right. He does seem to like his job.

But McCain needs to think about the future, not only for himself, but for his state of Arizona and the nation. As a (now) resident of a neighboring state, New Mexico, I can see a clear crossroads coming into view. McCain and Arizona have to decide whether they want to be part of the West or the Old South. They can’t be both.

The West is changing much more rapidly than the South, both demographically and ideologically. McCain needs to think about which region has the best future. Arizona has no Civil War legacy or Confederate baggage. So why should he join the Southern “no” chorus?

McCain is, at his core, a maverick and fighter pilot. Like a clever pilot with an enemy on his tail, he has changed direction many times.

Now he needs to decide again. Do his and his state’s futures lie in continuing to fight a smart, good, cautious and prudent President, who has just proved the people’s confidence anew? Or do they lie in fighting the jeering, extremist “no” chorus that his Southern GOP Senate colleagues have become?

These senators may be irredeemable. Their sitting on a figurative rural Southern fencepost and doing nothing but jeering seems to become them. McCain can do—and has done—more.

It’s time now for him to make another choice and another change in direction. The campaign, after all, is over, at least for about two years. I think he himself, let alone the public, would be amazed at how rapidly his support would rise if—yet again—he started to do the right thing. Somebody has to lead Arizona into the twenty-first century, and Sheriff Arpaio is not the man to do it.



  • At Sunday, January 27, 2013 at 12:50:00 PM EST, Blogger Warren Kim said…

    Dear Prof. Dratler,

    There is only one real reason business will invest, and that is a increase in demand for their products and services. No matter what the incentives are, if there will only be a glut of inventory, no amount of investment will pay off. The way to increase demand is more discretionary income for consumers, expansion of market territory, new demands created by a new products, or for products that are inelastic, because they will grow naturally with the population.

    While I am not a Marxist, the income inequality between the producers and workers will produce over inventory. Therefore, the market must keep on expanding.
    The workers must keep on working, and there will produce more than they can consume, and so there will be a need for fresh markets. It strikes me as kind of a ponzi scheme.

    But absolute power corrupts absolutely, and communism is more a literary product than a reality.

    It goes back I guess what all Democrats want, and the free market should want too, and that is R & D. The great technological minds are the new priests. The politicians only play a catch up game to the shifting world.

    One good news is that Malthus may be wrong. Population will not grow exponentially, as all indications are that prosperous people have less children. In fact, at one point in time, the population will start contracting.

    People's utils are at an all time high, especially with the advent of the PC and the internet. I can now access information at an instant with very little time invested. There is no excuse for staying ignorant. No matter what is my interest, the internet provides unlimited resources. I truly marvel at how the internet has changed my life for the better.

    One of the problem with the economy is imperfect information, and lack of information. The internet should help us have a more efficient market. I know there is a lot of junk on the internet as well. But the internet and the dispersion of control over content matter is truly exciting. It is becoming everything as it was promised.

    That's my two cents. I once tinkered about starting my own blog, but I am a working attorney with a teenager and a six year old. My wife thinks I am wasting my time, writing so many posts on different sites, but it makes me feel engaged. Perhaps I can make some difference.

  • At Friday, February 15, 2013 at 1:05:00 AM EST, Blogger Jay Dratler, Jr., Ph.D., J.D. said…

    Dear Warren,

    Your first point is a common misconception, so it deserves careful refutation.

    It's true for commodities like oranges or sugar. No amount of excess investment in production or supply will increase demand.

    But life is not just commodities. The progress of technology and civilization has created products and services that people never knew they needed until the existed. That's the kind of innovation my first post above discusses incentivizing.

    Your own comment refutes the logic of your first point. You write, " I truly marvel at how the internet has changed my life for the better."

    But the Internet didn't exist before 1996. It took start-up support by DARPA, massive public investment in infrastructure, and massive private investment after its release for commercial development in 1996 to bring it to life.

    Without that investment, few or none of the services that you use every day, including Google and (no doubt) Amazon would be available to you.

    So yes, investment in overproduction of commodities or other existing products will not produce demand. But from airplanes, air travel, radio, television, and movies to the Internet, next-day package delivery, and iPods and iPads, investment in innovative new products and services has and will.

    As for your disbelief in Malthus, I hope you're right, but think your'e wrong. The only country that is doing a good job of controlling population is China, and it's efforts are now lagging. While people in wealthy countries do tend to have less children, those in democracies like ours feel they have a God-given right to have as many as they like. That attitude of entitlement is unlikely to change.

    Perhaps you are right that, eventually, the global march of middle-class lifestyles will motivate having fewer children and giving each more love and a better living. But by then, the world's population may be thirty billion. I don't think I'd like to live lin such a world: too little space and too much pollution. I like to see the Milky Way at night, at least once in a while.

    I do agree with your paean to the Internet and information access. They make us all richer, without producing much new pollution or using too many scare resources. Maybe some day they'll help us all wise up and reject the enormous propaganda of self-interested corporations and wealthy people. But I'm not holding my breath.




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