Mitt Romney's selection of Paul Ryan has accomplished something quite important. At both conventions, in the corner rooms of Charlotte and Tampa organized by media groups and political activist outfits, serious discussions unfolded about the real state of the economy and the different policy approaches Americans needed to consider.
Paul Ryan is the most ideologically severe vice-presidential candidate in a century, a commentator said at a National Journal/Atlantic economic-policy dinner done on a not-for-attribution basis. But nearly everyone credits his selection with igniting a debate about tough choices on the economy that politicians and presidents have been ducking for decades. The clear consensus emerging out of Tampa's GOP convention and the DNC's in Charlotte is that there is a real choice being offered to Americans. The first option is "rigorous austerity" that could even further gut America's middle class and take the fallen standard of living to new lows. The second is a limited Keynesian approach that tries to reform while slashing spending.
There are also a couple of themes that aren't getting much air time but which deserve to be kicked around.
One of these, a charge leveled by Democrats about themselves, is that the Democrats have really screwed up -- twice. The argument goes like this: Back in the '90s, while the economy was expanding, the IT bubble was bubbling, and capital gains churning was filling federal and state coffers, Clinton -- guided primarily by his economic mentor and Treasury Secretary Robert Rubin -- helped ignite a financial-sector privileged wealth production machine that didn't take into account the long-term consequences of American manufacturing decamping to foreign shores.
In other words, Clinton pushed the Uruguay Round of GATT, set up China's membership in the WTO, and removed the important barriers that divided retail banking from securities trading. Clinton was highly influenced by the economic-policy practitioners on his team who carried with them all of the biases of neoliberal economics. Those who focused on the importance of manufacturing, of the role of government in seeing to the parts of the economic environment markets would not sustain, the importance of high-wage job creation, were pushed aside.
This is also exactly what happened during the first two years of the Obama administration, where those of a neoliberal persuasion prevailed over those who wanted to concentrate first on a serious jobs and infrastructure program.
That discussion came up frequently in the meetings in Charlotte. Arianna Huffington even held a "shadow convention" (as she also did in Tampa) on the subject of what is really working and what not in job creation in the United States. She believes that the Democrats on the whole are not having a serious debate about the jobs crisis today and have not taken responsibility for their own mistakes in favoring banks' survival over that of families losing their homes and jobs on a massive scale.
To be fair to President Obama, he inherited skyrocketing unemployment, collapsing global economy when he moved into the White House, and did take steps that stopped further, probably catastrophic implosion. He called on people like Lawrence Summers and Timothy Geithner in part because the world respected them and Obama needed to stop a global confidence crisis that was aggravating underlying economic instability.
But Obama allowed voices like Austan Goolsbee, Jared Bernstein, and Paul Volcker to be sidelined, while really technical financial and economic geniuses like George Soros never got in the door. Obama allowed the neoliberal, macroeconomic financial-sector-über-alles types to prevail over the micro-economic jobs, housing, and manufacturing voices.
Obama has shifted now and is pushing a jobs and infrastructure program that many Dems I spoke to in Charlotte say he should have led with in his administration. Ironically, the financial sector crowd that Obama bailed out are giving donations in droves to Mitt Romney, while many in the small donor base that previously supported Obama have lost their jobs and their homes and their willingness to send in $3.00 for a chance to play basketball or have dinner with the president.
At the National Journal/Atlantic dinner mentioned above, a prominent pollster said that there is no doubt Americans are better off. In his view, the global economy was going over a cliff, the mounting job losses were staggering, and America was facing a genuine potential depression. He said that most today, however dissatisfied with the status quo, know that jobs are being slowly created, that the recovery is really happening albeit slowly, and that the economy is heading generally in the right direction.
National Journal's Jim Tankersley, however, disputes that assessment in a powerful piece that should be read in full. In the opening clip, he writes:
The middle class in America today is not better off than it was four years ago, not better off than it was at the end of the Great Recession in 2009, not even better off than when President Clinton left office in 2001.
This is the truth that Democrats must confront as they anchor their national convention theme in Charlotte on vows of support for American workers: The middle class has been declining for more than a decade, including through the Obama recovery.
Inflation-adjusted median income fell by 2.3 percent in 2010 (the last year for which official statistics are available) and dipped below $50,000 per year for the first time since 1996, the Census Bureau reports. Real median weekly wages last quarter were lower than at the same time in 2002 -- and down 1.5 percent from the second quarter of 2010.
Ouch. Tanerksley is right. Americans are down and out, and on whole more down and out than when Obama came in, even if the original downward momentum wasn't the president's fault.
Obama failed to put a floor down that might have preempted further collapse of the housing market. He failed to use his powers to remove management teams at banks and financial shops that had been the purveyors of loans to Americans ill-equipped to service them.
One of the ironies of the two conventions was to watch wealthy GOP financiers and their representatives pound the table and lecture at the podium in Tampa that America was not better off than it was four years ago -- though they were personally much richer. In Charlotte, those who really were worse off were declaring that they weren't. Bill Clinton had them yelling that they were -- after all -- much better off than four years ago. Orwellian.
Finally, another topic not much discussed is one that former bank CEO and credit expert Richard Vague and I have been kicking around and which I have previously written about (and was referenced in this interesting Financial Times piece by Edward Luce).
The debate between Paul Ryan & Co. and the Obama/Biden-led crowd on the levels of government debt reduction necessary for a healthy economy that will grow is a false one. Vague and I show in this report that the deleveraging in the private sector in the U.S. since the economic collapse of 2008-2009 has been minor and that Americans are releveraging again. In other words, private debt loads -- which were not on the whole written down to reflect real values -- are again piling on debt.
The real culprit therefore is not government spending, but the level of private debt that banks and financial houses should have been writing down to real values. The fact that they have not been writing it down limits the capacity of the U.S. economy to return anytime soon to robust growth.
I wasn't expecting much in terms of substance from the two conventions, but it needs to be noted that in Charlotte and Tampa, a serious discussion about what constitutes smart economic policy was being had.
Mitt Romney and Paul Ryan may or may not win in November, but the spark that they initiated about economic policy challenges is healthy for the nation.
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