Killer Buffalo

Post-Partisan Political Intelligence

Big Questions for President-Elect Obama

Energy: The biggest question surrounding Obama’s energy plan is whether or not he will actually go through with it. Will he use the economic crisis as a justification to ignore promises for environmental reform and a commitment to ending climate change. Without a doubt, solving global warming—in addition to finding energy independence—is the most formidable challenge of our time. Yet there will be massive pressures from conservatives to tighten spending, particularly given the likely upcoming $1 trillion economic stimulus package. If energy is truly Obama’s first priority, as he stated during his second debate with Senator McCain, then he will forge ahead with funding for renewable energy research and implementation, economic crisis or not.

The Economy: The elephant in the room. Obama plans to implement a massive stimulus package as soon as he takes office. The proposed bill, if it passes in Congress, calls for paying unemployed workers to do “shovel-ready” state-run projects, especially those that focus on repairing the nation’s deteriorating infrastructure. The major problem is that few people actually have the requisite training to do such jobs. How many people are going to be paid for digging ditches and filling them back in again? While Mr. Obama and his team are eager to call his economic plan the “new New Deal,” it’s unclear how effective simply modifying 1930s programs—such as the WPA—would be; the underpinnings of the current economic crisis are in the housing market (read: subprime mortgages), which Mr. Obama has failed to address, and unlike in the ‘30s, the majority of American’s disposable income is not going towards domestically manufactured consumer products. Instead, it’s being spent on things like health care, which don’t “boost” the economy in any traceable fashion.

The Automakers: Although President Bush has already approved bridge loans to Chrysler and General Motors, it’s unclear whether they are more than a band-aid with short-term benefits and long-term impotence. In the current economic climate, people aren’t buying cars. Most don’t have the money, and those who do are saving it. That isn’t just a problem for the Big Three; it’s a problem for every automaker in the world. Even Toyota had recorded its first quarterly loss in 70-plus years. And if the current situation continues, no loan is going to keep unprofitable companies in business. Thus if GM and Chrysler are running out of money again in March or April, Mr. Obama is going to have to get his citizens to buy cars rather than continuing to use TARP funds to keep bailing out auto manufacturers.

Israel: Although Obama has toughened up his stance in the past year or so, he remains the least pro-Israel president elected in the past sixty years. That isn’t to say he will not continue the status quo: far more vehement American support for Israel than what comes from the EU. Even if that was his previous plan, Israel’s response to rocket fire from Gaza might make him reconsider. If Israel decides to utilize the ground forces it is currently massing, an invasion of Gaza might be seen by the broader public as being as unwarranted as Russia’s response to Georgia’s invasion of South Ossetia back in August. Although a cease-fire would be nice—and it’s likely that something will be worked out in the next twenty days given the extent of the damage—Israel’s situation is unsustainable if it needs to bomb a neighboring country every four years (remember Lebanon?). Mr. Obama once stated that he would sit down with Hamas, although, under pressure to move to the center, he later retracted that promise. Now—when open dialogue is desperately needed to resolve the conflict between Israel and Hamas before current hostilities widen into greater civilian casualties—it might be a prudent time to make good on that promise.

Iraq, Afghanistan and Iran: Mr. Obama will withdraw American troops from Iraq. Indeed, while the current war will draw to a close, bigger challenges lie to Iraq’s south and east. Acknowledging this, the President-elect has promised to employ a “mini-surge” in Afghanistan; but is that what Afghanistan really needs? Violence—which has flared—is not the same problem in Afghanistan that it was in Iraq. A troop surge of any kind will not correct outdated and ineffective methods of discouraging farmers from growing opium and a corrupt government. As top commanders in the region have been begging to have more attention paid to their demands, the US becomes increasingly embroiled in recession at home, only further distracting voters from Middle East Policy. Meanwhile, Iran is imminently dangerous. Even Mr. Obama’s correct decision to sit down with Mahmoud Ahmadinejad will likely fail? As much as the US would like Iran to believe that military action is on the table, Mr. Obama knows it isn’t; he needs a backup plan.

Social Issues: Where does Mr. Obama really stand on gay rights? His choice of Rick Warren to give the invocation address at his inauguration certainly has some progressives worried. Which Barack Obama will be living in the White House this year: the “center-left” Democratic nominee or the left-wing senator from Illinois?

-William Hakim
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What Four Years of an Obama Administration Will and Won’t Fix

Among other things, President Bush is generally blamed for widening America’s national debt and trade deficits, sending America to war in Afghanistan and Iraq, politicizing its Justice Department, violating its Constitution, and shattering the central power of its Republican Party.  And all over the course of eight years.  In half that time, President-elect Obama will have the potential to do quite a bit—withdraw American troops from the combat in the Middle East and overhaul the federal tax system—but regardless of his current popularity, there is quite a bit he will likely fail or neglect to do—namely finding a long term solution to rising health care costs and bringing the social security system back into solvency.

For Democrats, President-elect Obama has become synonymous with “political change,” particularly in Washington.  For Republicans, his name often conjures a sense of failure—as if such a liberal president were the creation of the failed ideologies of Mr.  Bush; progressive or regressive, Mr. Obama’s distinct liberalism will face success or failure in the New Year.

As December brought the announcement by the National Bureau of Economic Research (NBER) that the American economy is in recession, Mr. Obama’s advisory team ought to have been pleased: any current economic downturn is likely to reverse itself sometime over the next four years, and warranted or not, Mr. Obama’s tax policies, renovation of the public works system, and Keynesian deficit spending will be credited.

That being said, Mr. Obama will not be able to reverse longstanding budget and trade deficits despite what he had suggested in three presidential debates with Mr. McCain.  The extenuating circumstances of economic contraction, however, will excuse Mr. Obama from all but the most critical voters.

Mr. Obama’s so-called “universal” health care mandate will not be met with the same nearly universal approval.  Functioning more as a national health care mandate—in which possible increased taxes are leveraged to pay for the currently uninsured—Mr. Obama’s health insurance policy has already found itself critics—both on the Democratic side, who claim it does not go far enough to ensure equality in care, and on the Republican side, who claim it will drive up federal income taxes and medical costs eventually leaving more Americans unemployed.

Withdrawing American troops from Iraq and Afghanistan over the next fourteen months will be a difficult if not impossible task.  Mr. Obama has already begun adjusting unrealistic timelines for a complete end to American occupation of Iraq, though the United Nations (UN) Security Council could ban American troops from the country sooner.

In the meantime, Mr. Obama will need to rely on rousing optimism to extricate himself from harsh realities: that a balanced budget, promises on tax reductions, and national health care are mutually exclusive.  His oratory may thus prove more valuable as a presidential resource than as a characteristic of a candidate.  If not, Vice-President-elect Biden’s rhetoric will be a crude alternative.  So let Mr. Obama knock glasses with his wife; popularity, like politics, is a fickle game.

-David Lamb and Nicole Adams

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Monthly Poll Report—November 2008

What type of President Will Obama be? (Check two)

A popular president (27%, 203 Votes)

A good president (26%, 198 Votes)

A bad president (24%, 181 Votes)

An unpopular president (23%, 174 Votes)

Total Voters: 756

President-elect Obama’s favorability rating surpassed 60% in November.  Therefore it is of little surprise that, when asked what type of President Mr. Obama will be, more than 53% of Killer Buffalo readers insist he will be either “good” or “popular.”

Since Election Day, Mr. Obama has rallied greater support behind him as he selects his cabinet and advisory teams.  Though he has retired from his senate position and done little to address looming economic problems—particularly those in the rust belt related to the auto industry—that 60% favorability rating in November—has risen nearly 10% in the last month.  If he can translate current success at acquiring followers into the presidency, he will be a very popular president indeed.

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Mr. Keynes Finds a New Home

In 1919, John Maynard Keynes hypothesized that the free-market economy was fundamentally unstable—that rises in unemployment and drops in aggregate demand would not tend to self correct, but rather to self-magnify.  In 1936, in The General Theory of Employment, Interest, and Money, Mr. Keynes outlined how a government’s central bank could stabilize the economy, thereby avoiding the damaging boom-bust cycles of the late 19th and early 20th centuries.

Sixty-six years later American economist and Nobel-laureate, Joseph Stiglitz, attacked then chief-economist at the International Monetary Fund (IMF), Kenneth Rogoff, for participating in the economics of President Hoover—insisting that developing countries maintain balanced budgets, and therefore high overnight interest rates, in the face of recession.  Mr. Rogoff argued that while lowering national interest rates in emerging economies during economic depressions would stimulate demand, it would also drive deficit spending, which could easily cause investors to lose confidence in the immature currencies leading to unabated inflation.  Mr. Stiglitz, like Mr. Keynes before him, maintained that counter-cyclical monetary policies—namely lowering interest rates during periods of recession and raising them during periods growth—were necessary to protect economies from the downward spiral of depression.

For seven decades the Federal Reserve has pursued Keynesian strategies, loosening money when the economy contracts and tightening it when the economy expands, which has meant large budget deficits during recessions and smaller ones during surpluses.  Yet while Mr. Rogoff did agree with Mr. Stiglitz, that it makes sense governments should create consumer demand when it drops—through the power of easy credit—and recall borrowed money when aggregate demand grows, developing countries have previously been unable to afford such counter-cyclicalism.

Suddenly, emerging economies in Asia and South America are facing massive declines in expansion.  And where their governments have previously been reluctant to accumulate national debts and feared loss of confidence in their currencies over long economic recessions, they are experiencing a change in conviction.  In Thailand, where federal interest rates peaked at 23% in 1997, rates were lowered by one percent this month in order to ease credit and stimulate consumer demand.  Russia, India, Malaysia, South Korea, Indonesia, and now China have too pursued a counter-cyclical agenda, bringing interest rate cuts and stimulus packages over the past two months through deficit spending, a shift unprecedented in magnitude in emerging economies.

However Asian countries ought still to fear hyperinflation.  Even though Russia, India, Malaysia, Thailand, and China are now able to find funding to drastically cut interest rates, lower taxes, and potentially spend themselves into major deficits, perceived instability can cause withdrawals; investors, like customers, can walk with their feet.

If developing countries manage to consistently thwart recession through looser monetary policy, global Gross Domestic Product (GDP) may surpass 5% in coming years.  That Asian governments are willing to attempt to apply Mr. Keynes monetary theories could signal a renewed confidence in Keynesian economics.  Then again, it could merely be the result of them now being able to afford Mr. Keynes’ proposed policies, which is in turn a testament to their development over the past two decades.  Either way, looser credit may mean more subprime mortgages are on the horizon.

-David Lamb

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In Defense of Capitalism: The macroeconomic cost of a Detroit Bailout

As if to prove their cars capable of travelling more than five-hundred consecutive miles, CEOs Alan Mulally of Ford, Rick Wagoner of General Motors, and Robert Nardelli of Chrysler each plan to make their ten hour journey from Detroit to Washington D.C. tonight via automobile. Yet if the chief-executives of the Big Three automakers thought public pathos was a sufficient testimony to tempt Congress into endorsing a $34 billion bailout, they are likely to be disappointed.

If nothing else, the economic cost of bailing-out General Motors, Chrysler, and Ford could cause a breakdown of the free market system; if the federal government agrees to subsidize uncompetitive—but large—companies whose closure would damage the national economy, successful competitors will have little reason to continue making profits. If Congress and Treasury Secretary Paulson will save Detroit automakers from insolvency, why wouldn’t Toyota and Honda—both of which now produce the majority of their automobiles within the United States—begin granting large pay increases to corporate executives or selling automobiles below cost, intentionally over-expanding so as to employ more workers or otherwise mismanaging their assets with relative indifference? If the federal government is going to reward incompetence, should Mr. Paulson grant pay increases to the 110th Congress?

Undoubtedly encouraging a system where failure is met with financial incentives would drag the American economy further below its production possibilities curve than if the Big Three are forced to file for bankruptcy. Even taking into account Okun’s Law—that a 1% rise in unemployment leads to a 2% decrease in production—and the human costs of unemployment—namely social stress and a lack of self-confidence—larger unemployment in the short term is economically more palatable than the potential long term unemployment that could result from compromising businesses’ motivation to earn money.

Congress is well-aware that the Treasury won’t avoid immediate costs by refusing to yield to the demands of Ford, General Motors, and Chrysler. Pension outlays, though some can be renegotiated, are federally guaranteed; if one of the automakers fails to find sufficient funding, its workers’ retirement plans become the Treasury’s responsibility

And still the ceiling on unemployment payments resulting from a full-out closure of the Big Three is less than the $25 billion bailout proposed last week and much less than the newly revised $34 billion bailout, which means Mr. Mullaly, Mr. Wagoner, and Mr. Nardelli have some convincing to do. But before that, their unproven hybrids will need to elude malfunction for one long night. That’s a tall order.

-David Lamb

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Is the Electoral College Obsolete?

In 2000, then Vice-President Gore defeated then Texas Governor and Republican Presidential nominee George Bush in Maine, 49% to 44%. But unlike in Iowa and Minnesota where Mr. Gore won by slimmer margins and still captured each of the states’ electoral votes, in Maine he was awarded the support of only six of ten electors.

Having electoral votes awarded to the winner of the statewide popular vote and individually by district—as they are in Maine and Nebraska—started in Maine in 1972 after reformers argued that the winner-take-all system did not accurately represent the choices of voters. In 1992, Nebraska passed its own amendment to the state constitution and followed suit, though Nebraska’s five electoral votes would never be split until President-elect Obama captured one in 2008.

Since the establishment of new systems in Maine and Nebraska, many who previously voiced opposition to the American Electoral College have used the two states as models for a possible overhaul to the system. And yet despite that more bills have been introduced to Congress seeking to alter the Electoral College than any other single subject, and that the majority of Americans oppose the College, it has remained largely intact.

Even if Mr. Gore’s 2000 electoral loss—though he won the popular vote—proves that the system does not reflect the collective endorsement of the country, it does serve a purpose: it isolates recounts and generally brings a decisive winner. In 2000, when Mr. Gore earned nearly sixty million votes, he led the nationwide popular vote by less than one half of one percent. Had America relied on the popular vote to declare its new President-elect, a national recount or run-off election would have likely been necessary. Either way, after spending tens of millions of dollars and requiring tens of millions of citizens to take time from work, a more satisfactory result might not have been reached. Nonetheless, since Florida became the only state where a winner was too close to call, the College made the state the only place that required a closer counting of ballots. Had the Electoral College found a decisive winner instead—where Florida was not necessary for a candidate to secure 270 electors—a recount would have been completely avoided.

Philosophic battles will persist over the manifestations of American democracy and more bills will come before Congress, some supporting a popular vote system and some looking to modify the electoral system. Thus far the only changes made have been made by states in their individual constitutions. The Electoral College was founded in a now distant country of greater emphasis on the rights of states. But convoluted or not, and whether it should be abolished or not, the system is not necessarily the dinosaur that most people think it is.

-David Lamb

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Unrealistic Hopes: 59 days from the White House Obama needs to reassess expectations

Fewer than four weeks ago then Senator Barack Obama followed Bruce Springsteen onto a Cleveland stage, characteristically calling for “hope over fear” and “unity over division.” Yet during this November 2nd speech, as in those of the previous week, Mr. Obama qualified his pleas for reform in Washington, arguing—even as he stood by prior proposals for nearly universal tax cuts—that altering the federal government’s social agenda would come with a price. Being only two days from the election, Mr. Obama forestalled estimating such a cost.

Over the past twenty days news of Germany’s first recessionary quarter in five years has surfaced, Treasury Secretary Paulson has unveiled plans for an approximately $300 billion bailout of Citigroup Inc, and stock markets have collectively frowned at the prospect of an Obama presidency. Meanwhile Mr. Obama, coming under fire for not reversing the global economic downturn from his Senate seat, has repeatedly reminded Americans of the Constitution’s strict “one president at a time” policy and resigned his from his elected position.

As supporters reexamine the practicality of Mr. Obama’s proposed quadruple-bracket tax reductions among his ardent support for a second financial bailout, many have begun to worry he will renege on past promises for expanded social and educational programs. Even if Mr. Obama does put his nationalized health insurance plan before Congress come February, he will need to put-off tax cuts in the short term. In the long term—if he governs from the White House the same way he does as President-elect—he will need to footnote President Reagan as a primary influence; the philosophy with which he pursues government intervention in the financial sector—attempting to prop up the economy from the top bracket—more resembles trickle-down Republicanism that he criticized during the campaign than the bottom-up populism he advocated.

For now, Mr. Obama has begun to temper expectations. Perhaps his message of hope and optimism was too successful or perhaps recent financial turmoil has put a ceiling on his own ambitions. Either way, Mr. Obama does realize that he’s up against unrealistic expectations and an angered public looking for executive bloodshed. And if he continues to hand out golden parachutes to departing Wall St. CEOs, Americans might find him a suitable severance package.

-David Lamb

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The Empire Reflex (An appendix to the two-part series “How America Lost Democracy”)

Cruel or generous, sophisticated or muddleheaded, the military was the leadership by which I sought what I was capable.  Nationalism for the sake of nationalism was the banner by which I pledged my allegiance and the empty conscience was how I fought for it.  If victory was persuasion of our morals, I was told, then a cultural indifference to the things we stood for was defeat—or as close as made no difference.

I was told that conquering hearts was a full time job; that it came without rest, that it fed upon itself, and that the job was never finished; never would I earn the full minds of our countrymen.  I was told that righteousness was a means to an end.  For some that was Heaven.  Or else it was the prostitutes the gentiles shared with each other.  For me it was usually the Republic.  In weaker moments it was a warm bowl of oatmeal.

Two months passed a confrontation in a Basrah suburb and the memories would fade.  I was told that the critical colors of self-reflection would fade into one, and I would not again make the same mistakes.  The colors might be grey or white or a tone no one had yet seen, but they would be a monolith.  Formed and filed into an extreme of my body, I was told, they would fade away.

I was told that our fathers never stopped treading the countryside, and that they never let the constancy get to them.  If depression was mental, it was not fatal; and it could not be.  The Europeans, I was told, were a crazy bunch.  I was told the Orientals were crazier.  That sometimes, if you left them isolated for long enough, they would speak in tongues.  I would visit their places nonetheless—the spires and the cocktail parties—and my job there would not need to be laid-out for me.  Our Republic was strong enough without their hearts, but not so without their weapons.  I was told that victory was persuasion, that defeat was impossible, and that the job was never finished.  With one hand on a bible and another on a forehead, I was told my allegiance would be pledged.

-David Lamb
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General Motors and the Free Market: Why bankruptcy is in order

Two months ago, Treasury Secretary Henry Paulson designated $25 billion in federal loans for struggling Detroit automakers, including $5 billion for General Motors to attempt to secure a fleet of more fuel efficient cars, a condition of last year’s Energy Independence Act.  As GM executives cut spending and production, planning to close factories in Windsor, Ontario and Moraine, Ohio over the next year, they are also hoping that Mr. Paulson and the 110th Congress will deliver an early Christmas gift.  Unfortunately for them, President Bush and Mr. Paulson don’t seem too keen on the idea.

It’s with good reason that much of the American Executive Branch opposes a General Motors bailout.  GM’s financial woes have been a long time coming, and the troubles the company now faces are nothing compared to those it might were it to stay in world automobile markets; President-Elect Obama’s higher corporate tax proposals and national health care mandates are likely to cripple what emerges from GM come January, 2009.

But the growing infeasibility of domestic automobile production is not the primary reason GM has failed and certainly not the reason Mr. Bush refuses to give in to the business’ pleas for financial backing.  General Motors’ consistent losses in market share over the past fifty years have been the result of corporate mismanagement and a failure or an unwillingness to adapt to the changing tastes of American consumers.  Most recently, the rapid decline in sport utility sales and overproduction of such vehicles at the assembly line have proved a worthy example.  Before that, it was the reluctance to negotiate with union workers on employee health insurance and retirement pensions.

When Congress has agreed to treat Mr. Paulson like America’s federal investor, the most important reason not to give funding to GM is that it’s not a good investment.  Even Democratic Congressmen like Senator Kerry and House Speaker Pelosi agree that the purpose of government isn’t to employ workers.  Neither is it the purpose of the capitalist government to save failing businesses from failure: most have been unsuccessful for a reason.  If the federal government wants to encourage growth—or at least thwart decay—within the automobile industry, why not loan money to those who have run successful businesses?  Why not grant Toyota and Honda $10 billion to establish manufacturing in Detroit?

The free market can sometimes translate to survival of the fittest.  The free market also predicts that companies which cannot turn a profit in the past, often cannot in the future.  If Mr. Paulson inflates the size of GM now, the company could cause greater collateral damage when it’s forced into closure at some point down the road.  Either that or another bailout will be in order.  And if the Treasury is going to spend that money later, it might as well spend it correctly now or if it can’t, not spend it at all.  America has long been a history of winners and losers, and sometimes someone has to let the winners win, as they do the losers lose.  Perhaps it will be some consolation for laid-off General Motors workers that Christmas is coming up, December 25th.

-David Lamb

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Weekly Poll Report (Week of 10/12)

Did the three presidential debates lead you to change the candidate you support?

No (49%, 278 Votes)

I did not watch any of the debates (44%, 253 Votes)

Yes (7%, 38 Votes)

Total Voters: 569

Last month Killer Buffalo’s editors hypothesized that most voters watch political debates with firm and previously established opinions.  Much of research done in the effectiveness of debates for the shows them to be moderately influential on the electorate at best.  Although neither President-Elect Obama nor Senator McCain revised any of their previous proposals during the three presidential debates, each did articulate their economic plans and emphasize their differences—namely that Mr. Obama’s raises corporate taxes and income taxes on the wealthy and cuts income taxes lower-income Americans, while Mr. McCain’s calls for the continuation of President Bush’s tax reductions on high-income earners.

This poll’s results indeed show the debates to have been largely ineffective, but Killer Buffalo’s readers represent a small and highly opinionated slice of the American electorate.  Without a doubt, studies will be done on the three debates of September and October and more conclusive findings will come.  Until then, keep checking in.  Coming up are an interview with the author of Choose Foreclosure: The Case for Walking Away and a two part series on the positives and the negatives likely in Mr. Obama’s administration.

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