Opinion

The Great Debate

Larry Summers is playing economic Jeopardy

Editor’s note: This op-ed was originally published at the Financial Times in response to the recent piece by Lawrence Summers for Reuters. It has been republished, verbatim, with the FT‘s permission.

Larry Summers’ considerable intellect suggests that he would be an excellent contestant on the popular game show Jeopardy. Of course, on the show, the question offered by the contestant must match the answer on the board. Summers and I disagree on the answer that matches the question “What is President Obama’s budget?” Let’s see why.

I asked two questions in an op-ed in Wednesday’s Wall Street Journal. (Neither question was addressed by Mr Summers, or in the simultaneous parallel critiques offered on the airwaves by US Treasury Secretary Timothy Geithner and former Council of Economic Advisers Chairman Austan Goolsbee). The first question was whether the tax increases on high-income individuals proposed by President Obama (the Buffett rule, higher taxes on dividends and capital gains, a higher top marginal rate, and so on) raised enough revenue to materially offset the country’s large budget gap or higher federal spending under President Obama. The answer, using revenue estimates from the Treasury Department and spending estimates from the President’s budget is ‘No’. The second question was what that spending growth implied for future tax rates. That is, if federal spending as a share of gross domestic product was to increase permanently as the president proposes, by how much would taxes need to rise? Answer: a lot and for everyone. This simple thought experiment presumes that we will not ratify permanently larger deficits.

Without addressing these questions, Mr Summers proposes a different one. President Obama’s budget is supposedly fiscally sound because the Congressional Budget Office (CBO) has estimated that the budget would stabilise federal debt as a share of GDP for a short while. Yet, let’s look at what the CBO said. First, while the CBO shows the debt-to-GDP ratio stabilizing for a period of time – at an uncomfortably high level – in the budget window, it is not stable in the long run. Second and more importantly, in its April 20, 2012 report, the same CBO that Summers cites so selectively observed that the permanent deficits in the President’s budget would reduce the level of economic activity. By CBO’s estimate, under the President’s proposals, the CBO estimates for the 2018-2022 period, that the nation’s real output would be between 0.5 and 2.2 per cent lower compared to what would occur under current law. This adverse effect would grow in the future, as deficits continue to mount.

The President’s budget has met with little success in Congress. The 2013 budget was voted down in the House of Representatives, 414-0. The Senate did not bring the 2013 budget to the floor, though the 2012 budget was voted down in the Senate, 97-0.

Romney should be proud of Massachusetts health law

It’s been six years since Mitt Romney signed the Massachusetts healthcare reform law. That law was a framework for change, a values statement about what we believe in Massachusetts: that health is a public good and that everyone deserves access to affordable, high-quality healthcare.

Six years after its passage, our experiment in universal healthcare is working, expanding coverage while helping to control costs. Mitt Romney should be proud of the law he signed. As the one responsible for implementing it, I know I am. Here’s why.

More people have health insurance in Massachusetts than anywhere else in the country: 98.1 percent of our total population. Of our children, 99.8 percent are covered. While the number of people without health insurance in America grew from 2006 to 2010, more than 400,000 people in Massachusetts gained coverage.

How Ron Paul may have won — and lost — Maine

Washington County, Maine, is the easternmost point in the continental United States. This region of rocky shores and pinetree forests is populated by proudly independent — and defiant — citizens.

The Republicans in Washington County have supported such radical and underdog candidates as Ross Perot and Patrick Buchanan in the past.

Too bad they didn’t get to participate in the Maine caucuses last weekend.

What is American exceptionalism?

Newt Gingrich and Mitt Romney, although they spend a lot of time these days at one another’s throat, appeared on the night of the South Carolina primary to agree on at least one thing: Each believes in “American exceptionalism,” and, they say, Barack Obama does not. Gingrich has already devoted an entire book to the topic, and in an interview with my colleague David Rohde, a top foreign policy adviser to Romney made it clear that American exceptionalism is a theme that Romney intends to stress throughout the campaign.

It’s easy to see that these candidates view their own ideas about American exceptionalism as a strong opportunity to contrast themselves with the incumbent. It’s harder, though, after sifting through the various ways the term is used, to establish what it actually means. Far from being a simple concept that one can easily endorse or reject, American exceptionalism is a loose skein that uneasily unites many different strands of thought, faith and ideology.

Like so much in the discussion of American history, the phrase is often traced to Alexis de Tocqueville’s Democracy in America. But that doesn’t explain much, because when de Tocqueville wrote that “the position of the Americans is therefore quite exceptional,” he was referring primarily to the development of a practical — as opposed to literary or artistic — worldview, stemming from the American landscape and the lack of an aristocracy. More to the point, Gingrich seeks to ground the term in the American Revolution: “The ideals expressed in the Declaration of Independence, and the unique American identity that arose from an American civilization that honored them, form what we call today ‘American Exceptionalism’,” he wrote in A Nation Like No Other, published last year. But that explanation, too, is inadequate; after all, the authors of the Declaration of Independence went out of their way to universalize the values underpinning the American experience (“when, in the course of human events…”), not to cleave that experience off from the rest of the world.

The GOP’s hunt for Latino voters

Jon Huntsman suspended more than just his campaign this week. He also put an end to any hope the GOP had of making strides in the Latino community.

And despite the stereotypes, because of the Obama administration’s policies, there really was hope. The administration has increased the number of deportations to nearly 400,000 people a year since taking office, according to ABC News. Likewise, in Secretary Janet Napolitano’s annual report to Congress, she describes the Department of Homeland Security’s efforts to be at “record highs.” President Obama’s first term has featured twice the number of deportations as George W. Bush’s by instituting a systematic approach to immigration enforcement not seen since the infamous days of “Operation Wetback,” a program in which President Dwight Eisenhower deported over a million Mexican nationals, among them American citizens.

One might think this would be an opportunity for the GOP to make inroads with the Latino community, but the Republicans seem confident they can sit idly by as Latinos simply run into their arms. The GOP claims economics are Latinos’ most important issue, but with over half of Hispanics within a generation of the immigrant experience, migration is also a profound issue (and one with profound economic consequences). And on that issue, most of the GOP candidates have done little to distinguish themselves.

from David Rohde:

Yes, we’re creating jobs, but how’s the pay?

Update: The December job numbers released this morning continued the same trend described in yesterday’s column. Of the 200,000 new jobs created last month, 78,000 – or nearly 40 percent -- were in transportation, warehousing and retail, sectors known for low pay and seasonal hiring. In a far more positive sign, manufacturing gained 23,000 workers in December after four months of little change. A vast expansion of that trend would benefit the middle class tremendously.

WASHINGTON -- Between now and November, middle class Americans are going to hear an enormous amount of bragging about job creation.

Mitt Romney will tout his role in the creation of Staples, The Sports Authority and Domino's, three firms that he says created 100,000 jobs. Barack Obama will say 2.9 million jobs have been created since March 2010, and highlight a surge of 140,000 new private sector jobs in November.

Gingrich’s anger management

By Michael A. Cohen

The views expressed are his own.

WINDHAM, N.H.—Newt Gingrich is flying high these days – on top of national Republican polls and currently leading in three of the first four Republican primary and caucus states. He hasn’t been this relevant in American politics since Bill Clinton sat in the White House and Titanic was the biggest movie in America. But while the new Newt is clearly enjoying himself, seeing him on the campaign trail brings back familiar glimpses of the old Newt, defined far more by his acid tongue than he was by his policy acumen.

On Monday night, Gingrich took his frontrunner status on the road to New Hampshire, where he spoke at a packed town hall in Windham to crowds that were as ecstatic for him as they would have been for Leo and Kate. More than a thousand Republican partisans were there to greet him. What they got was the sort of grandiose ideas and red-meat political attacks against liberals – and in particular President Obama – that have been the hallmark of Gingrich’s political career, the key to his recent political rise, and perhaps his best hope for winning the Republican nomination. In a year in which Republican voters are angry with Obama and angry with Washington, all the GOP wannabes are cultivating conservative ire – but no one quite does it as effectively and as gleefully as Newt.

For Gingrich then, New Hampshire is a win-win state. The state is generally seen as Mitt Romney’s fail-safe; the place where he must—and should be able to—win in order to keep his election hopes alive. Moreover, the state GOP tends to be less socially conservative than their Iowa brethren; more attuned, it seems, to a Romney rather than Newt candidacy. Nonetheless, Gingrich’s numbers in New Hampshire are beginning to tick up, becoming Romney’s top rival and within shouting distance of first place. If he loses, the world won’t come to an end – and if he wins it could be the killer blow to Romney’s campaign. All the more reason, it seems, for Gingrich to play up his frontrunner credentials and critique Romney.

from Paul Smalera:

How Obama wins the election: the economy, stupid, and everything else

By Paul Smalera
The opinions expressed are his own. 

Mitt Romney and Newt Gingrich, and the entire Republican presidential field before them, have enjoyed painting Barack Obama as a European-style socialist, an apologizer, an appeaser, a president who is ceding America’s place in the world. Their stump speeches and debate soundbites seem to always end with some variety of the phrase, “when I’m your president, I’ll make America great again.” It would seem the nation is hungry for that kind of leadership; after all, polls now say that Obama’s job approval ratings are worse than Carter’s at the same point in his term. The game clock would seem to be running down on his re-election hopes. But what if it turns out we’ve been reading the scoreboard wrong, and Team Obama already has the lead? What if, by the time Americans get to vote, less than a year from now, America is already great again?

Coming off the heels of a nasty recession and horrible intertwined crises in banking, housing and economic confidence, every decision President Obama and his team made on the country’s way forward has come under intense scrutiny. Inevitably, the left has called some decisions, like the smaller-than-hoped-for size of his stimulus bill, weak sauce. The right has decried everything this administration did, as with health care reform, as lurching us towards socialism. Even Rockefeller Republicans have changed their spots in order to make libertarian arguments, as when Mitt Romney argued in the New York Times that the auto-industry bailout was wrong and Detroit should have been allowed to go broke.

One shouldn’t feel bad for Obama -- this kind of scrutiny comes with the job, after all. But the criticism his administration has endured from all sides has seemed particularly craven, perhaps because the stakes have been so very high these past few years. And yet, the political capital invested in his centrist, negotiated policies are now paying dividends. Perhaps Bill Clinton was a smoother operator, but it’s beginning to look a lot like Obama’s triangulation of policy, politics and the press is working, and that may deliver him to a political comeback and a 1996-style election victory.

from Ian Bremmer:

Romney’s foreign policy: Reagan redux

By Ian Bremmer
The views expressed are his own.

After yet another GOP debate where foreign policy took a near-total backseat to economic and domestic policy, Mitt Romney is in the catbird seat for the nomination. He even locked up the endorsement of Tea Party AND Republican machine favorite, New Jersey Governor Chris Christie. Romney’s only problem: it’s October 2011. Not one primary has yet taken place. Romney will have to return to his foreign policy platform to expand it, should he be fortunate enough to make it to the general election. And based on the speech he gave at The Citadel, we can already see that Mitt Romney intends to return to the American exceptionalism of the Ronald Reagan and George W. Bush eras.

For Romney, as for many politicians of both parties in decades past, the United States is not just a big and powerful country. Rather, it is the only country in the world that deserves superpower status. What’s unfortunate for Mitt and his all-star, Bush-heavy foreign policy team is that, these days, that line of thinking is more nostalgic than realistic. (By the way, though Romney was almost bombastic at times, calling Iran’s leaders “suicidal fanatics,” his actual policies are unlikely to reflect or adopt that tone -- at least not with his foreign policy team as constituted now.) The idea of the U.S. as the leader of the free world is at a post-WWII nadir. However, that’s not because some other country, like China, has risen to fill the vacuum. No, the fault is wholly our own.

In fact, right now there’s a global debate about whether the U.S. really deserves its superpower mantle, given the political and economic issues of recent years that have unquestionably eroded its leadership position. It’s helpful to compare the two camps:

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