PPI Senior Fellow, Roger Ballentine, explains in The Hill why the cost of gasoline matters far more than the price:
“Recently, it seems the debates on Capitol Hill make even less sense than usual.”
“Look closely and you will find that the same politicians who demand more domestic oil production to “relieve pain at the pump”, simultaneously and inconsistently, attack the Obama administration’s efforts to increase fuel economy standards.”
“Take Rep. Darrell Issa (R-Calif.), for example, the chairman of the powerful House Oversight Committee. He’s launched a needless investigation into the administration’s new mileage standards, even though they were negotiated with—not imposed upon—Detroit. Most importantly, Rep. Issa blindly ignores that boosting fuel efficiency is a sure-fire way to lower gas costs for American families. Republicans can chant “drill, baby, drill” all they want, but they can’t repeal the basic laws of economics.”
Nobody likes excise taxes—those annoying extra costs people notice only because of how narrow and random they are. They show up on hotel bills and cell phone bills. They are added on to the cost of alcohol, gasoline, and cigarettes. And the list keeps growing. For example, in 2010, Newark, New Jersey, imposed a 5% tax on rental cars while Baltimore imposed a 2-cent per bottle tax on soda.
New data from the Census Bureau shows just how much local governments relied on in-creases in excise taxes to fill budget holes during the recession. PPI calculates that excise tax revenues collected by local governments—not including gas or tobacco—increased 5.2% from 2007 to 2009, compared to a decline of 8.1% in national retail spending by consumers, including restaurants. Even when you add in gas and tobacco, excise tax revenues rose by 4.5% during the recession, while local government general sales tax revenues went up 1.6% and national output (GDP) declined by 0.6%.
The large growth in excise taxes relative to the drop in retail sales shows that during a time when incomes were down, local government turned to these narrow, selective taxes imposed on consumers to make up the balance. For example, two tourist meccas, Las Vegas and New York City, raised hotel room taxes in 2009.
While the data reported in the chart applies only to local governments, state govern-ments also looked to excise taxes to solve their financial woes. In fact, 22 states raised excise taxes on tobacco, alcohol, or motor fuel in 2008 and 2009, with 24 states enacting other types of excise tax increases during the same period.
PPI Chief Economist, Michael Mandel, discuses the challenges facing America’s economic recovery on Marketplace:
“After a number of incremental but positive indicators that have come out in the past couple of months — the so-called “green shoots” — today’s fourth quarter GDP was a reminder that our economy is still very fragile. Like a green shoot of a plant or a tree, our economy needs a lot of nurturing to really grow.
“Mike Mandel is the chief economic strategist for the Progressive Policy Institute. He says lower-than-expected GDP in the final three months of last year reflect an economy that’s “on the road to recovery,” but it’s a “slow, uneven recovery.”
“Mandel says we still haven’t solved a key underlying problem: We’re investing too little in increasing our productivity and too much on consumption. According to Mandel, we went into this recession too focused on consuming and neither public or private investment has been enough of a priority.”
Will Marshall analyzes the SOTU and Obama’s populism at Politico’s Arena:
“President Obama emphasized fairness and pledge to raise taxes on wealthy Americans. If this be populism, we are all populists now, and the voters are solidly behind the president on this. But the prevailing tone in Obama’s speech wasn’t class warfare, as some political reporters have claimed. It was economic patriotism.
“Obama’s State of the Union Speech last night was Clintonian, in two senses. First it was stupendously long, as Clinton’s SOTU speeches tended to be. Second and more important, Obama repeatedly evoked consensual American values and common national interests, muting rather than inflaming ideological or partisan differences.”
Last Saturday’s South Carolina primary sent the Republican presidential nominating contest into strange and possibly uncharted territory. Front-runner and “Establishment” favorite, Mitt Romney, turned in a dismal performance, while twice-left-for-dead Newt Gingrich not only swept the state but quickly seized the lead in both national GOP polls and in Florida, where voters go to the polls on January 31.
Newt’s Florida “bump” was especially impressive, since the Sunshine State was supposedly Romney’s “firewall” that would maintain his momentum even if disaster struck in South Carolina. Moreover, Gingrich took the lead there even though Romney had enjoyed virtually uncontested control of the airwaves, having spent (via his own campaign and his Super-PAC) over $5 million in ads, mostly attacking the former Speaker on his Freddie Mac “historian” gig. Thanks to another $5 million check from Sheldon Adelson’s family, Newt’s fighting back with his Super-PAC recently buying $6 million in Florida air time.
Gingrich’s ace-in-the-hole throughout the campaign, namely his ability to rally conservatives to his side by attacking the news media, didn’t work as well for him in the first of two pre-primary debates in Tampa on January 23. Instead, Newt was largely on the defensive against attacks from Romney. The debate, however, ended more or less as a draw, with Mitt once again struggling over questions about his tax returns. For this reason, the final debate in Jacksonville tomorrow could prove decisive.
In terms of the second-tier candidates, Ron Paul is not seriously contesting Florida, preferring to focus on upcoming caucus states. But one real imponderable here is the trajectory of the struggling campaign of Rick Santorum; his collapse or withdrawal could give a crucial boost to Gingrich, given the strong evidence that Newt is his supporters’ overwhelming second choice. That being said, it remains unclear how much Gingrich’s South Carolina win was attributable to the late withdrawal of and endorsement from Rick Perry, since the Texan’s support-levels there were low and vanishing. Regardless, there are generally strong signs in national polling that Gingrich has now become the Tea Party’s adopted candidate, with Romney depending to a dangerous degree on self-identified moderates.
One fascinating aspect of the contest at present is the vast gulf between elite and rank-and-file views about the two leading candidates’ “electability.” The prevailing elite view is that Gingrich would likely be a disastrous general-election candidate, as is already suggested in general election polls, particularly given the low odds that he could continue to avoid scrutiny of his marital and financial background in the long slog to November. Contrary to such skepticism, however, exit polls in South Carolina showed Newt soundly defeating Mitt among voters most concerned about “electability”. It seems Gingrich’s claim that he can end-run media “protection” for the incumbent in debates clearly sounds compelling to a lot of conservatives who don’t spend much time perusing polls and probably don’t trust them anyway.
Of course, if Romney manages to win in Florida, the road ahead will likely become much easier for him. With a slew of caucuses that will reward his financial and Establishment advantages, followed by a February 28 primary in his native state of Michigan, Mitt would likely enter Super Tuesday (March 6) poised for victory. Gingrich’s failure to get on the ballot in Virginia would merely be icing on the cake.
But a Romney loss in Florida could cause a real crisis of confidence in him in the very Establishment circles he is counting on. There are already some signs of panic, with renewed talk (not terribly realistic, given the rapid passage of filing deadlines for primaries) of last-minute candidacies by an assortment of pols who chose not to run earlier in the cycle. Indeed, last night’s credible SOTU response by Gov. Mitch Daniels is certain to encourage some Republican pundits to cast goo-goo eyes in his direction.
Meanwhile, Democrats have been greatly encouraged by the rude interruption of Romney’s cakewalk to the nomination; by the weaknesses in his background Gingrich has exposed; and of course, by the tantalizing prospect that Republicans might actually nominate the man who became a useful punching bag for Bill Clinton when they shared power in the 1990s. Obama’s combative SOTU address indicated the incumbent has fully shifted into re-election mode. And his slowly improving approval ratings, along with fragile but encouraging economic news, provide a decent foundation for a strong campaign against an opposition party that continues to surprise virtually everyone including itself, however unpleasantly.
In our policy brief, “Reviving Jobs and Innovation: A Progressive approach to Improving Regulation,” we describe how such a Commission could work. Neither Congress nor the executive branch currently has an efficient, streamlined process for eliminating outdated regulations that stifle innovation and growth. The Regulatory Improvement Commission could fill that void.
IDEA #2: Starting up start-ups–Improving access to credit and access to capital for smaller businesses
In “Underwater: Home Values in 2012 Battleground States,” we looked at home values in 16 potential battleground states from 2008 to 2011. We find both an enormous loss of middle-class wealth and a potentially potent political issue. We also offer up some practical first steps toward restoring home values.
In our memo, “It’s About (the) Time: Ending the Nonstop Campaign,” we propose changing congressional ethics rules to ban members from directly accepting campaign contributions except during election years. This proposal would free up members to spend more time making policy instead of raising money.
In our memo “Defense and Deficits: How to Trim the Pentagon’s Budget–Carefully,” we propose a floor of 3 percent of GDP beneath which defense spending should not be allowed to fall. Such a level would ensure that investments in R&D and procurement are sufficiently robust to maintain America’s superior industrial base and high-tech weaponry.
As the 2012 election approaches, the nation’s unemployment rate will continue to drive the political debate and, in turn, the fortunes of President Obama and his GOP rivals.
Despite the central focus on unemployment, however, another number deserves equal attention as a barometer of the nation’s overall economic health: housing values.
As catastrophic as it is to lose a job, the percentage of Americans who are unemployed is actually exceeded by the percentage of Americans who have either lost significant wealth from their homes or are currently “underwater”—owing more on their mortgages than their homes are worth. Since 2006, Americans have lost a total of $7 trillion in housing wealth—a figure that, according to the Federal Reserve, is more than half of the nation’s aggregate home equity.
In recent days, the Obama Administration has telegraphed its intention to devote more energy to housing—and with a focus on foreclosures and defaults. While this is laudable, the Administration should not neglect a second front: the tremendous loss of housing wealth.
In this report, we make our case by analyzing home values in the 16 battleground states that will serve as the proving ground for 2012. In 15 of these states, home values have fallen by an average of 16% since October 2008. We also offer up suggestions for tackling this issue.
No doubt, every contender for the White House will have a jobs plan. But no economic plan can be complete without an equally robust plan to rebuild housing—and in particular, to rebuild housing wealth. Policies that address this loss of wealth, even for those not at immediate risk of losing their homes, makes sense both politically and economically
Negative equity: A new crisis in middle-class wealth
In a reversal of the optimism that is typical of Americans, 41% of people in a January 2012 poll—including a majority of seniors—said they feel less financially secure than last year, while just 14% said they feel more secure.
The loss of wealth—and housing wealth in particular—might help explain why.
According to the Federal Reserve’s Survey of Consumer Finances, 62.5% of families suffered a loss of wealth from 2007 to 2009. Moreover, says the Fed, “declines in home equity were an important driver of decreases in wealth.”
Homes made up 47.6% of the total non-financial assets held by Americans in 2009. Between 2007 and 2009, American homeowners saw their equity drop by a median of 11.8% (or $18,700).
From its peak in 2006, the Case-Shiller housing index (the “Dow” of home values) has fallen 32.93%, including an 11.33% decline from October 2008. Median home prices have fallen from $196,600 to $164,100.
As many as 12 million Americans are now “underwater” with mortgages that are more than their homes are worth.
The loss of home equity has broad implications for the nation’s economy beyond mere sentiments of economic confidence. For example, underwater homeowners can’t qualify to refinance their homes, which means they can’t take advantage of one of the Administration’s most successful monetary policies: low interest rates. A 1% lower interest rate on a $200,000 mortgage can mean $168 less in interest payments per month—money that could be spent in the broader economy on other things.
Underwater borrowers are also stuck in their homes, unable to trade up or move out (a problem that also limits job mobility). Negative equity also means no nest egg for homeowners nearing retirement, and fewer resources to draw on for households seeking to finance a new business, help a child through college or weather out a spell of unemployment or ill health.
With the South Carolina primary on tap this Saturday, Mitt Romney is breathtakingly close to a victory that would likely all but clinch the presidential nomination. He’s been ahead in every public poll taken in South Carolina since his win in New Hampshire. His conservative opposition remains divided. And the one candidate who did drop out after New Hampshire, Jon Huntsman, promptly endorsed Romney after months of badmouthing him.
But a strong debate performance by Newt Gingrich on Monday, and the $3.4 million his Super-PAC invested in attack ads on Romney that have generated a lot of even more powerful “earned media,” have placed the outcome in South Carolina in some doubt. A final debate on Thursday, along with the decision—or indecision—of conservative opinion-leaders to consolidate support behind a single candidate, could make a difference.
Romney and his own Super-PAC have clearly concluded Gingrich is the main, and perhaps the only, real threat, and have resumed the intense fire on the former Speaker (heavily utilizing former House colleagues) that cut him down to size in the run-up to the Iowa Caucuses.
Meanwhile, the candidate who came out of Iowa with a strong claim to have finally become the “true conservative alternative” to Romney, Rick Santorum, is struggling a bit, though still, along with Ron Paul, showing up in the mid-teens in South Carolina polls. Santorum appeared to have obtained a real breakthrough last Saturday, when a sizable group of conservative religious leaders convened in Texas by Christian Right warhorse Tony Perkins announced it had reached a “consensus” to back the Pennsylvanian. But almost immediately, backers of Newt Gingrich who attended Perkins’ conclave contested this interpretation of events, and suggested the group was evenly divided between Gingrich and Santorum, with the vote to endorse Santorum only occurring after a big percentage of attendees had already left. In Monday’s debate, Santorum didn’t exactly shine, and found himself on the defensive for voting against a national “right-to-work” bill in the Senate (not a popular position among union-hating South Carolina Republicans).
Lost in the shuffle has been Texas governor Rick Perry, who hasn’t registered double-digit support in Palmetto State in any poll since October. Though he’s campaigning heavily around the state, the main publicity coming out of his campaign this week was the request made by one of his earliest and most prominent South Carolina supporters, state senator Larry Grooms, that he withdraw from the race and enable someone else to beat Romney. South Carolina looks to be Perry’s last stand, and it isn’t going well.
If Gingrich does somehow catch up with Romney, or perhaps even if Romney narrowly wins but Perry and Santorum do poorly enough that they are forced to drop out (no one expects Ron Paul to withdraw until the Convention itself), the next question will be whether Gingrich’s latest rise from the political grave will inspire a national renaissance of his campaign, or at least make him competitive in Florida, which votes on January 31. Until today, polls in Florida and nationally were showing Romney building huge leads over the field. But a Rasmussen survey released today, the first taken since Monday’s debate, shows Gingrich suddenly within three points of Romney nationally.
One note of encouragement for Gingrich might have gained a lot more attention earlier in the year: Sarah Palin told Fox viewers that were she voting in South Carolina, she’d vote for Newt. This was, however, the most indirect endorsement yet from Palin, famous for sometimes phoning in endorsements: she said she wishes Newt well so that the campaign can continue, and the winner can receive a more thorough vetting. Well, there’s no question she is an expert on the need for candidate vetting.
Assuming Romney survives South Carolina and other early tests to become the nominee, it’s worth wondering how much general-election damage he’s suffered from attacks on him by Gingrich and others. Aside from the Bain Capital issues raised so visibly by Gingrich’s Super-PAC (complicated most recently by allegations that one Bain beneficiary was a company that disposed of “biomedical wastes” from abortion clinics), his reluctance to release his tax records is turning heads, and each day he has to spend precious general election capital reassuring conservatives that he’ll be sufficiently loyal to their priorities in office. And in general, the nomination campaign continues to shine light on the gap between GOP “base” preoccupations and more mainstream sentiments, as illustrated by Monday’s debate. Democrats couldn’t have been happier with the spectacle of wealthy Republican candidates spending the Martin Luther King holiday lecturing poor and unemployed people on how to develop a work ethic while the audience howled for blood like Romans.
Yesterday’s meeting of the Council on Jobs and Competitiveness saw a long list of expensive and long-term recommendations, but one important idea was missing that could help generate new jobs cheaply and quickly: A Competitiveness Audit. A Competitiveness Audit will help identify which industries are competitive, near-competitive, or not competitive, so we can target future public and private investments in a way that will stimulate the economy and create jobs that are competitive internationally.
Right now we have no concrete data on U.S. competitiveness – in other words, we are flying blind. It’s incredible that for all of the data swirling around the internet, for all the information being pumped out of statistical agencies and for all of the numbers people worldwide have immediate access to, we do not have basic information on how U.S. prices compare to foreign-made prices for comparable items. We can find out Celine Dion owns about 3,000 pairs of shoes but have no clue how much a piece of furniture made in North Carolina compares to a similar piece being imported from China.
President Obama’s new “insourcing” initiative, launched last week, gets right to the heart why we need a Competitiveness Audit. Tackling the issue of restoring competitiveness head-on is a welcome commitment from the Administration, but we need more data to tackle it successfully. Finding ways to insource production (recapture imports) in a way that expands U.S. exports and restores U.S. competitiveness will be extremely challenging, if not impossible, if we don’t know where to look. After all, what good is investment if it goes toward an industry that has little chance of being recaptured, like clothing? The last thing America needs is to spend valuable investment dollars that get us to the same place as that Alaskan bridge: nowhere.
If the Administration is serious about encouraging insourcing and restoring competitiveness, something PPI’s Chief Economic Strategist Michael Mandel noted in a recent blog could create many U.S. jobs, then it’s important to get it right. Effectively targeting investment to encourage innovation and revitalize manufacturing is the right way to move forward. Conducting a Competitiveness Audit is the first step.
The job market for new college graduates is healing, but very slowly. The unemployment rate for new college grads was 7.4% in the 12 months ending November 2011, just the same as a year earlier (by our definition, ‘new college graduates’ are people aged 21-26 with a bachelor’s only). That’s up from 3.9% in 2007, according to our tabulations of the Current Population Survey.
And for today’s college grads, a lack of jobs is not the worst of their problems. They are getting the short end of the stick, and the stick is just getting shorter as college costs creep ever higher. Over the last decade, the average amount of student debt for college graduates increased by a staggering 25%, in constant dollars. Yet the reality is this is not surprising, given how tuition costs have skyrocketed in the last ten years. According to the Department of Education, tuition costs and fees across all four-year colleges and universities increased by 32 percent from 2000-2010, with public institutions showing an average increase of 40 percent, all in constant dollars. Families are struggling to keep pace, which lead to two-thirds of 2010 college grads taking on debt before they even finished school.
What’s more, as student debt for young college graduates becoming a bigger burden, their real wages are falling. Over 2000-2010, average wages for full-time workers aged 25-34 with only a Bachelor’s degree fell by 15% percent, after adjusting for inflation. The same jobs their peers got just ten years earlier are paying less. So, just as college is getting more expensive, graduates are less able to pay for it.
This is an inconvenient truth that cannot be wished away. College grads are an important segment of the advanced skill workforce that we are relying on to get America moving again. Instead we find too many them living in tents, spending valuable time wondering how Adele could feasibly “set fire to the rain” instead of developing the next cancer treatment, the next manufacturing technology, or the next software designed to protect America’s borders. If they can’t find work, then where does that leave the rest of us? Perhaps we’ll all be living in tents, playing Hacky Sack and Frisbee, sooner than we think. Like it or not, this truth is here, and until we address it college grads will only become more frustrated and more disconnected. With good reason.
For new college graduates, the world is their oyster. Without many of the real-world burdens the rest of us face, they can do anything they set their mind to.
That is, unless they start their careers staggering under a pile of student debt. It would appear that student debt is one rather onerous real-world burden bestowed upon college graduates the day they are handed their diplomas—and this burden is causing them more stress now than at any point in the last decade.
Using data on average student debt and wages for young college grads, PPI has calculated the Payback Stress Index. This new measure enables us to quantify, for the first time, the increasing burden of student borrowing for today’s college graduates.
Based on the Payback Stress Index, PPI finds that paying off college debt was 58% more economically stressful for students who graduated in 2010 compared with students who graduated in 2000. Specifically, we calculated how long it would take to pay back the average student loan, given the average earnings of full-time workers aged 25-34 with only a bachelor’s degree. We then indexed that calculation to what the average repayment time was in 2000, assuming an interest rate of 6 percent, and assuming that the representative college graduate paid 5 percent of earnings at each repayment. The chart below of PPI’s Payback Stress Index maps the rise in financial stress facing each class of college graduates.
Climbing Stress Mountain, No End in Sight
The Payback Stress Index allows us to compare different graduating classes within a single framework. To be sure, the PPI Payback Stress Index works with averages, and uses certain assumptions that may not hold true for every graduate—each college graduate with a student loan has their own repayment term and some were able to take on no debt at all. We’re also assuming real earnings don’t change throughout the repayment period, which affects how long it takes to repay student loans.
Still, the sharp climb in student debt payback stress has no end in sight—leading young college graduates to wonder when, or if, they will ever make it to the top and come down the other side. It’s no wonder the younger generation has started giving the traditional benefits of going to college a second thought.
PPI’s Executive Director Lindsay M. Lewis argues for a time-out from the nonstop campaign in today’s Politico:
Partisan gridlock is the standard explanation for why Congress gets so little done these days. But there’s another reason for lawmakers’ dwindling productivity: They spend too much of their time asking for money instead of legislating.
While there’s no shortage of ideas for campaign finance reform, many run afoul of Supreme Court rulings that treat political donations as a protected form of free speech. But there’s a simple way to ease the fundraising burden that doesn’t require amending the Constitution or passing new laws: Call a “time-out” on collecting cash in non-campaign years.
Specifically, Congress should amend its ethics rules to require an off-year “fundraising quiet period.” House members would be forbidden to accept campaign donations except during an election year. For senators, the time out would apply through the first four years of each six-year term — leaving the last two years to fundraise.
After a campaign often described as “boring,” a New Hampshire Republican electorate showing no great signs of excitement performed its expected duty on January 10, giving Mitt Romney a solid win and making it increasingly difficult to see a path to the nomination for anyone else.
Romney’s 39 percent of the vote in New Hampshire was about what the polls had long predicted, but some last-minute turbulence in surveys and speculation that Paul or even Huntsman could pull an upset reset expectations nicely for Mitt, making his comfortable win look formidable. Paul’s 23 percent of the vote was also pretty predictable, and now that his two best states are behind him, we can expect his campaign to focus on small caucus states where it’s easy to pack rooms. Huntsman, having staked his entire campaign on a New Hampshire breakthrough, campaigning virtually nowhere else, may talk bravely of his third-place (17 percent) finish as giving him a “Ticket to Ride” to later states, but it’s hard to see much of a constituency for his defy-the-Tea-Party campaign in more conservative parts of the country. But like everyone else persisting in this strange nomination contest, Huntsman can help prevent other candidates from consolidating the non-Romney vote, at least until the money runs out.
If there was any surprise in New Hampshire, it’s probably how poorly the “true conservative” candidates performed. Newt Gingrich, who had the coveted endorsement of the New Hampshire Union-Leader, narrowly finished fourth (with 10 percent) ahead of Iowa co-winner Rick Santorum (9 percent), who clearly did not get much of a “bounce.” Rick Perry made no pretense of campaigning in New Hampshire, but still, it’s a bit shocking to see this one-time bully-boy of the field finishing just ahead of Buddy Roemer, with less than one percent of the vote.
Now the campaign will quickly move to its crucial southern phase, with primaries in South Carolina on Saturday, January 21 and in Florida on January 31. Victories by Mitt Romney in both would pretty much wrap up the nomination for him, and the latest polls from South Carolina and Florida have shown him likely to do just that.
Indeed, at the moment the biggest threat to Romney’s candidacy isn’t so much a rival, but a line of attack by rivals that could easily carry over into the general election. A Super PAC (Winning the Future) supporting Newt Gingrich, and brandishing a $5 million contribution from casino magnate Sheldon Adelson has produced a series of ads viscerally attacking Romney’s firm, Bain Capital, for killing jobs and companies in South Carolina. Somewhat more subtly, the ads also associate Romney with Wall Street malefactors, not the most popular people in the country right now. And there’s hardly a millisecond in the ad copy released so far that could not be used against Romney by pro-Obama forces later.
Given the destruction of Newt Gingrich’s front-running candidacy in Iowa by negative ads run by a pro-Romney Super PAC, this development is not terribly surprising, though the lack of inhibition with which both Gingrich and Rick Perry are pursuing the Bain attack line is interesting coming from conservatives who systematically oppose regulation of Wall Street. But the immediate question is whether Winning the Future will have a significant impact in South Carolina, where they have already bought $1.6 million in pre-primary TV ads and could buy more than double that figure.
The Palmetto State is clearly Rick Perry’s Last Hurrah, and right-wing opinion-leader Erick Erickson (at whose RedState annual meeting in South Carolina the Texan announced his candidacy back in August) reports that Perry’s South Carolina effort looks impressive. If so, it hasn’t shown up in the polls, where Perry is running consistently in the mid-single digits in the state. Hard-core anti-Romney conservatives in South Carolina seem evenly split between Gingrich and Santorum, and only if they begin to coalesce around a single candidate could the destructive work of Winning the Future bear fruit, other than in declining favorability ratings for Romney. The poohbah who could easily resolve the indecision among South Carolina conservatives, Sen. Jim DeMint, has said he does not intend to endorse anyone this cycle, and, moreover, has predicted Romney will win his state. There’s no reason at present to doubt he is right.
But without question, the assault on Bain Capital will be watched closely by Democrats, not just because it might hurt Mitt Romney, but because it will test the latent hostility of the voting public (even its most conservative segment) to some of those “wealth creators” Republicans are forever lionizing.
Mitt Romney’s campaign for the Republican nomination is unfolding like a well-crafted business plan. He hit his numbers in New Hampshire last night, saw his most dangerous rivals tumble, and reinforced the aura of inevitability that surrounds his candidacy.
Everything seemed to fall Romney’s way. After his dizzying ascent in Iowa, Rick Santorum fell back to earth with a fifth-place finish. Newt Gingrich, who went snarling across New Hampshire like a wounded beast, flamed out. Ron Paul came in second, which suits Romney just fine. Paul’s libertarian purism inspires cult-like fervor among his young followers, but it will never command majorities in GOP primaries.
Yes, it was a good night for John Huntsman, but probably the best he’ll have this year. He did well among independents, moderates and voters who don’t like the Tea Party, a not-so-representative sample of the GOP electorate. He has nowhere to go, and it seems unlikely Romney would put another Mormon on his ticket.
Now it’s on to South Carolina, where Romney already leads, and where Paul’s useful presence will inhibit last-ditch attempts by conservatives to form an “anybody but Mitt” coalition. If he wins in the South, the race is effectively over.
What are the implications for progressives of Romney’s emergence as President Obama’s likely opponent in November? Let me offer four:
First, don’t underestimate Romney. It’s hard not to be impressed by Romney’s methodical, disciplined march to the nomination, even if, like me, you are appalled by his willingness to change positions that get in his way.
On the other hand, Romney has a big structural advantage that is usually decisive in Republican nominating battles. No, it’s not money, it’s the fact that he’s the establishment candidate. Romney ran second to John McCain in 2008, paying his dues and learning lessons that have helped him avoid mistakes this time around. Now he’s the GOP heirarchy’s presumptive choice, even if most conservatives don’t much like or trust him.
Romney may have tepid support from the GOP base, he may be pathetically unable to connect with ordinary Americans, but he is a competent, calculating machine who knows how to map and adapt to challenging political terrain, whether it’s very liberal Massachusetts or the radically conservative Iowa caucuses.
Second, electability is trumping ideology. Nearly 60 percent of New Hampshire voters said their top priority was a candidate who could defeat President Obama. Only 14 percent said they were looking for a “true conservative.”
This of course is bad news for President Obama, who would have loved to face a Tea Party favorite like Michele Bachman, Rick Perry, or even Newt Gingrich. Then the fall campaign would have been about GOP extremism rather than the economy. That the Tea Party’s least favorite candidate appears headed toward nomination is a tacit admission that the party has veered dangerously from the political mainstream.
Third, an Obama-Romney match-up will be a fight for the political center. Newt Gingrich is right: Romney began his career as a “Massachusetts moderate.” That means he will have more “crossover appeal” to swing voters than his GOP rivals, which he’ll need to offset minimal enthusiasm from conservatives. Given his now legendary “flexibility,” it shouldn’t be hard for Romney to pivot back to the center. He might even warm to Romneycare again, to demonstrate his pragmatic acceptance of government’s role in health care, and of his willingness to work across the aisle to get things done.
In any case, neither candidate can rely on a mobilizing their base to win election. That means Obama will have to work harder to win back independent and moderate voters who deserted his party in 2010.
Fourth, the economy is the issue. Much of Romney’s “electability” stems from his cred as a successful businessman and manager who knows how the real economy works. As he made clear in his victory remarks last night, Romney intends to make the 2012 election another referendum on Obama’s economic performance.
Democrats hope to turn Romney’s success as a corporate turnaround artist against him, echoing Gingrich’s claims Bain Capital “looted” firms and cost workers their jobs. But Obama should be leery of hitting the “vulture capitalism” theme too hard.
The swing voters who will decide the election want action to fix the economy, not scapegoating. Rather than allow himself to be lured into a debate over what’s he done to fix it, Obama needs to frame the race prospectively, as a choice between competing paths to economic renewal. His top priority must be to develop a bolder, more compelling plan for reviving jobs, spurring economic innovation, and restoring U.S. competitiveness.
PPI Chief Economic Strategist Michael Mandel, writing for the Washington Monthly, challenges the widespread complacency on the right and on the left about American productivity growth:
“In 1939, when John Steinbeck completed The Grapes of Wrath—a heart-wrenching tale of a family of sharecroppers forced out of their home during the Depression— roughly one-quarter of the U.S. population still lived on farms. Today, family farms are increasingly rare, and less than 2 percent of employed Americans work in agriculture.
“But rather than viewing the decline of farming jobs as a tragedy, economists almost invariably count agriculture as a shining American success—the triumph of productivity. And why not? A handful of farmers using GPS-equipped combines and sophisticated moisture sensors can grow far more food than the population of an entire rural county in 1939. Food has become so plentiful and cheap in the United States that it has been blamed for the increase in obesity. And agricultural products have become one of the country’s chief exports, totaling more than $115 billion in 2010.
“As the story of the American economy is usually told, the shrinkage of agricultural employment was a tough but essential part of the march toward higher incomes and a better standard of living. What’s more, this example has been cited time and again to explain subsequent upheavals in employment. In 2003, N. Greg Mankiw, a Harvard economist who then headed President George W. Bush’s Council of Economic Advisers (CEA), told a Washington audience that the more recent fall in manufacturing jobs was an “inescapable” consequence of rapid productivity growth: ‘The long-term trends that we have recently seen in manufacturing mirror what we saw in agriculture a couple of generations ago.'”
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PPI Chief Economic Strategist Michael Mandel, writing for the