Views on the News

May 5, 2012

Views on the News*  

There is every reason to be deeply skeptical of President Obama's prospects in November.  Republicans feel an understandable anxiety about Obama's coming campaign: It will be all slice and dice, divide and conquer, break the country into little pieces and pick up as many as you can.  He'll try to pick up college students one day and solidify environmentalist support the next, he'll valorize this group and demonize the other.  He means to gather in and hold onto all the pieces he needs, and turn them into a jagged, jangly coalition that will win it for him in November and not begin making individual demands until December.  It still matters that the President doesn’t have a coherent agenda, or a political philosophy that is really clear to people.  Republicans are worried about the power of incumbency, and it is a real power.  This President is always out there, talking, but has anyone noticed how boring he has become?  It is still so surprising that a person who seems bored by politicking has risen to the highest political office in the land.  How odd to have a Democrat President who doesn’t seem to like humans all that much.  When you look at Romney you see a wealthy businessman, a Mormon of inherently moderate instinct, a person who is conservative in his personal sphere but who lives and hopes to rise in a world he well knows is not quite so tidy.  He doesn’t seem extreme.  There is a growing air of incompetence around Obama’s White House.  It was seen again in Supreme Court arguments over the administration’s challenge on illegal immigration.  The Court seems to be disagreeing with the administration’s understanding of federal power.  This follows last month’s embarrassing showing over the Constitutionality of parts of ObamaCare.  You get a growing sense that no one’s in charge, that the administration is paying attention to politics but not day-to-day governance.  The 2012 election is simpler than we think: It’s about Obama and whether you like the past four years and want another four like the last four; does the President strike you as competent, if so renew his contract, if not fire him; or does the other guy look credible and does he have better ideas than the last one?

(“A Bush League President” by Peggy Noonan dated April 26, 2012 published by Wall Street Journal at http://online.wsj.com/article/declarations.html )

Election Day 2012 will not only be voting for a President (and a House and a third of the Senate), it will be a plebiscite on the definition of America.  If Americans re-elect the Democrat, Barack Obama, they will have announced that America should be like Western European countries, governed by left-wing values.  Americans will have decided that America's value system, "Liberty," "In God We Trust," "E Pluribus Unum," should be replaced.  That is what "fundamentally transform" means.  In fact, those words are proof that American values and leftist values are fundamentally opposed to one another.  The right, on the other hand, seeks to maintain America's values.  Conservatives want to improve America, but, as its name implies, conservatism seeks to conserve, not transform.  "Liberty" means, first and foremost, limited government, because bigger government means less individual liberty.  "In God We Trust" means that America must be rooted in Creator-based values.  There are no inalienable rights if no rights derive from God.  "E Pluribus Unum" means the assumption of an American identity by all citizens regardless of their racial, ethnic or national background.  The left seeks to replace “Liberty” with “Equality.”  Material inequality is the great evil, and if individual liberty needs to be sacrificed to attain equality, so be it.  Creator-based values are to be replaced by government-based values.  "God-fearing" is to be replaced by "State-fearing."  God must be removed from schools and wherever else the left can succeed in doing so.  "E Pluribus Unum" is to be replaced by “multiculturalism.”  For leftism, the very words "American identity" conjure up chauvinism, if not fascism.  For these reasons, this election is not just a choice between a Democrat and a Republican, it is between Americanism and leftism.  The conflict between Americanism and leftism is between ideas, not between decent and indecent people.  If this election is indeed a plebiscite on America, Mitt Romney cannot campaign solely, or even primarily, on the state of the economy.  Romney should not overly personalize his campaign.  He is running against Obama, but Barack Obama is not the biggest issue.  The left's desire to transform America is the biggest issue.  Barack Obama is to be opposed because he is a man of the left.  Mitt Romney and the entire Republican Party need to describe this election as the plebiscite on America that it is with their most urgent task in American life to make clear, and then repeat as often as possible: leftist values and American values are in conflict.

(“November is a Plebiscite on the American Revolution” by Dennis Prager dated May 1, 2012 published by Town Hall at http://townhall.com/columnists/dennisprager/2012/05/01/november_is_a_plebiscite_on_the_american_revolution )

Arguably, no Presidential campaign in the past 30 years has dawned with voters as singularly focused on a single issue as they are this year because in the aftermath of a debilitating financial crisis and amid a feeble and halting recovery from recession, polls show that voters want economic growth and more jobs.  President Obama and Mitt Romney are offering dramatically different paths to those ends, in philosophy and in the fine print of policy; in the targets of their campaign-trail attacks; and even in what they’re not saying about the nation’s most pressing economic problems.  Not included, though, is a detailed debate over how to get millions of unemployed Americans back to work right away.  Each candidate has a reason for soft-pedaling when it come to delivering fast-acting comfort to the 13 million Americans who are looking for a job and can’t find one and who will spend an average of 40 weeks on the unemployment rolls before they return to work.  Romney’s reason for avoiding this question is not at all like Obama’s, a reality that reflects the candidates’ divide in economic thinking.  Romney’s economic philosophy begins with the classic conservative notion that intrusive government has stifled the free market.  Obama starts with the liberal notion that government can and must play a critical role in nurturing innovation and vital industries.  Each camp lays out medium- and long-run strategies for improving America’s economic fundamentals and coaxing growth and job-creation back to speed.  In the short term, neither has a lot to offer.  Obama is struggling with voters’ widespread belief that his short-term economic efforts have failed, and with political realities that largely preclude further steps in the same direction.  Yet for all their twists and turns, Romney and Obama have always disagreed on the proper role of government in the economy.  Romney’s view, forged in his years running Bain Capital, is that smaller government frees private industry to create more productivity, more profits, and more jobs; that high levels of government spending and debt crowd out private investment; and that overregulation stifles economic growth.  Obama’s view is that government plays a critical role in correcting market failures; in investing in public goods such as roads and schools; and in regulating industries, most notably Wall Street, that could drag the national economy down if left to their own excesses.  The jobs package that Romney says he would send to Congress on the first day of his presidency is a mix of five policy goals: reducing the top corporate-tax rate from 35% to 25%; cutting $20 billion a year in domestic spending; expanding domestic oil and gas drilling; implementing free-trade agreements; and consolidating and reforming federal job-training programs.  He has also proposed an across-the-board 20% tax cut for individuals on top of making the Bush tax cuts permanent.  Romney has embraced the House Republicans’ budget plan to rein in debt by limiting the growth of social-safety net spending, in hopes of boosting investors’ and financial markets’ confidence and averting a U.S. sovereign-debt crisis.  The President has called for a large new infrastructure-spending package and for more government investments in research and development.  He has embraced a next-generation industrial policy, though not by name, aimed at boosting competitiveness and growth in targeted sectors such as auto manufacturing and clean energy.  He has pushed a series of initiatives to expand exports, which have grown into one of his few bragging points of the economic recovery.  This election comes down to which vision do you believe in: Democrat big government centralized economic planning or Republican limited government with decentralized free market entrepreneurship?

(“A Choice, Not an Echo” by Jim Tankersley dated April 27, 2012 published by National Journal Magazine at http://nationaljournal.com/magazine/a-choice-not-an-echo-20120426 )


The 2012 Presidential race will be, in part, a showdown between two different models of economic growth.  President Barack Obama and his Democratic administration will defend the once-discredited and now-resurgent theory that government must act as the economy's "tutor" and use public funds to stimulate it.  The Republican nominee, almost certainly Mitt Romney, will advance the free-market argument that the main source of new growth is the innovative energy of American entrepreneurs and that government needs to get out of the way.  An essential part of the free-market argument is "creative destruction," a theory proposed by the great Austrian economist and Harvard University professor Joseph Schumpeter.  As November nears, the Republican nominee may have to figure out a way to show voters how essential it is to American prosperity.  Schumpeter believed that progress in a capitalist economy requires that the old give way constantly to the new: production technologies in a free economy improve constantly, and new products and services are always on offer.  This creative transformation also has a destructive side, since it makes earlier products and services, and the workers who provided them, obsolete.  Today's consumers have little reason to buy an oil lamp instead of a light bulb, or a Sony Walkman instead of an iPod, which can be bad news for the people who manufacture the oil lamp and the Walkman.  Creative destruction can take place not just across sectors of the economy but within particular firms, too.  Since the invention of the automobile, many automakers have disappeared, unable to improve their products; those that survived have had to transform themselves radically to stay competitive.  Sometimes firms even change their business to stay alive.  Think of IBM, which started in 1930 by building calculating machines, shifted to computers in the 1950s and today is a service company.  Trying to prevent creative destruction brings economic torpor or worse and at the extreme were the 20th century's totalitarian Communist regimes.  Innovation is very rare under such state-stifled conditions.  The same weakness affects, though less dramatically, the watered-down form of state economic planning often practiced in European democracies and renascent in America under the Obama administration, with its Keynesian stimulus spending, massive bailouts of the auto industry, partial takeover of General Motors, and subsidies of alternative energy.  Economies open to creative destruction have innovated more, created more employment and enjoyed higher growth rates than their statist rivals.  No place has been more open to creative destruction than the United States, where whole cities, left behind by technological advance, have crumbled into ruin, with abandoned factories standing forlornly alongside rusted railroad tracks and many workers long since departed to clear new lands, like the pioneers of yesteryear.  The willingness of Americans to endure creative destruction has allowed their economy to outperform European economies for decades.  It may therefore be necessary for defenders of creative destruction to balance Schumpeter with some form of social support.  It is misguided to protect superseded firms and industries, they would maintain, but helping people displaced by economic progress is a moral imperative.  They would argue for the implementation of a "compassionate capitalism," perhaps including unemployment benefits, retraining and various welfare services.  A compassionate capitalism wouldn't merely be humane; it would also help preserve capitalism, because in a democracy, creative destruction cannot occur without some type of safety net.  Workers who risk losing their jobs and lack any social support will soon vote an end to free markets and unless Obama is denied a second term, we will probably continue to move in a European direction, and without the liberating fire of creative destruction, the United States will follow Europe down the path of slow growth, high unemployment and decline.

(“A Growing Economy Necessarily Has to Have a Destructive Side” by Guy Sorman dated April 27, 2012 published by Investor’s Business Daily at http://news.investors.com/article/609540/201204271858/joseph-schumpeter-believed-economic-destruction-brought-prosperity.htm )


Four years after the start of the financial crisis, and six years after home prices began to collapse, the housing market is still shaky.  Nationally, prices are about 35% below their peaks in 2006, according to the S&P/Case-Shiller Home Price Indices, and in some markets homes have lost 60% of their value.  About one in four homeowners with mortgages, some 11 million households, are "underwater," owing more than their homes are worth.  Construction and sales of new homes remain anemic, with housing starts about one-third the historical average.  The key question remains whether the housing market has hit bottom yet?  If it has, are prices likely to climb, or will they bounce along the bottom for some time, for many months, perhaps for years?  Answers vary from one part of the country to another.  The slow housing market does not just affect people who want to buy or sell homes; it is dampening the whole economy.  When home building is down, construction workers are idle.  With fewer home sales, fewer people are spending money to move and form new households, affecting everything from furniture sales to moving firms.  And the low level of sales means real estate agents are not getting much work, and are therefore spending less.  Among the housing market's key problems is an excess supply of homes due to the building binge in the late 1990s and early 2000s.  Because homes last so long, an oversupply does not dwindle as quickly as it does for non-durable goods.  Millions of homeowners bought during the market peak in the middle of the past decade, at inflated prices before the crash.  It could be years before those homes are again worth what their owners paid, and homeowners with negative equity, owing more than their homes are worth, typically cannot move.  Research shows that a homeowner with negative equity is one-third less likely to move than a homeowner with positive equity.  On the positive side, today's extremely low mortgage rates, around 4% for a 30-year, fixed-rate loan, give buyers a lot of borrowing power.  Meanwhile interest rates are unsustainably low and as rates rise, we would expect that will have a fundamental negative impact on housing prices once again.  Despite the fact that housing is extraordinarily affordable, it is difficult to get a mortgage because there has been a ratcheting up of [lending] standards.  Today, driven by underwriting policies of Fannie Mae, Freddie Mac and the Federal Housing Administration, plus their own bad experiences, lenders want at least 20% down, a big financial hurdle for buyers.  Appraisers are under pressure to be more conservative in valuing homes.  In the past, buyers used equity in the current home to trade up, but now many people have little or no equity, or negative equity.  Mobility is at historic lows, and the trade-up market is impacted.  For any housing recovery to gather steam, the backlog of foreclosures, and distressed homeowners who could end up in foreclosure, must be reduced.  Just how many homeowners will end up in foreclosure is impossible to predict.  Falling unemployment reduces the problem, but the 25% of mortgage holders who are underwater could produce a new wave of defaults if the economy takes a jolt.  That's the shadow supply of homes that could become available if something happens to the owner, because of a health shock or an employment shock.  Another spike in foreclosures would depress home prices by increasing supply with homes offered at fire-sale prices, since lenders are better off minimizing losses by getting what they can quickly rather than carrying empty homes while awaiting higher prices.  Half of the borrowers who took out subprime loans between 2005 and 2008 are in default, typically 30 to 60 days behind on payments.  The Obama Administration's efforts to help people avoid foreclosure have had only limited success.  Generally, these have focused on reducing the borrower's payments relative to income, and making it easier to refinance at today's low loan rates, which reduces monthly payments.  Unfortunately, about half of borrowers who have gone through some type of loan modification default again afterward.  Various proposals have been made to assist underwater owners by reducing the loan balance.  Lenders cannot be forced to do this, and they have been reluctant to participate in voluntary programs because they don't want to book the losses or encourage other borrowers to default to get a portion of their loan forgiven.  There are a lot of problems with principal reduction.  The first issue is moral hazard, the risk of encouraging more defaults.  Second is the straight-up fairness issue. After all, most homeowners continue making payments even if they are underwater or wrestling with other financial troubles.  While most experts believe that will happen eventually, and the housing market will improve, it is far from clear whether the housing market of the future will ever look like that of the bubble years.  Americans have long viewed the home as a key step to prosperity, a major "investment, and while this never was completely true, as home appreciation barely beats inflation over the long run, the housing bust has demonstrated that homeownership has its downside, too.

(“Optimism is Up, but the U.S. Housing Market Faces a Painful Shift” dated April 25, 2012 published by Wharton School at http://knowledge.wharton.upenn.edu/article.cfm?articleid=2987 )


The overall issue of immigration remains misunderstood by both political parties in Washington: many Washington Republicans confuse voter opposition to illegal immigration with opposition to all immigration; while many Washington Democrats confuse public respect for hardworking immigrants with a belief that borders and immigration laws don't matter.  On the issues before the court, most voters tend to side with the state of Arizona rather than the federal government.  Fifty-nine percent of voters nationwide, for example, agree with one of the law's most controversial provisions, that police officers should routinely check the immigration status of those they pull over for other violations.  Most voters would like to have a law like Arizona's in their own state, but that says more about voter respect for the law than it does about the immigration issue.  Voters figure if there's a law on the books, the government should enforce it.  That's why, among voters who are angry about the immigration issue, 83% are angry at the federal government rather than the illegal immigrants themselves.  It's also why two-thirds of voters think those who knowingly hire illegal immigrants are a bigger problem than the people they employ.  Simply put, most Americans are angry at those who would entice others to break the law.  They're not angry at people who are willing to work hard to provide for their families.  In Washington, the entire focus of the immigration debate is on how to deal with those already living here illegally, but for voters, this is a secondary concern.  The bigger concern is how to secure the border so future immigrants enter the county according to the rules.  Routinely, in surveys for years, 60% or more of voters say securing the borders is a higher priority than legalizing the status of the illegal immigrants who are here now.  Once voters are convinced that illegal immigration is a thing of the past, it will be easier to address the status of those in the country already.  Voters don't believe the federal government has any interest in securing the border.  Most believe the policies of the federal government are designed to encourage illegal immigration, and this offends voters who want to respect the rule of law.  If immigration laws, or any laws, are routinely ignored, then the government loses credibility.  If the laws are enforced, 61% of voters favor a welcoming policy that lets anybody come to America except national security threats, criminals and those who would live off the U.S. welfare system.  All who would like to work hard and pursue the American Dream are welcome.  The bottom line is that voters remember what many in Washington often forget: America is a nation of immigrants and of laws, and the American people want both traditions to be honored.

(“Voters Understand the Immigration Debate; Politicians Don’t” by Scott Rasmussen dated April 27, 2012 published by Town Hall at http://townhall.com/columnists/scottrasmussen/2012/04/27/voters_understand_the_immigration_debate_politicians_dont )


* There is so much published each week that unless you search for it, you will miss important breaking news.  I try to package the best of this information into my “Views on the News” each Saturday morning.  Updates have been made this week to the following issue sections:

·  Religion at http://www.returntocommonsensesite.com/Culture/religion.php

·  Social Security at http://www.returntocommonsensesite.com/Culture/socialsecurity.php


David Coughlin

Hawthorne, NY