The Centrist Delusion
Robert KuttnerTom Friedman of the New York Times is at it again, claiming that what America needs to fix our economic and political mess is a radically centrist third party. Radical in this case means conservative when it comes to belt-tightening. Friedman in Sunday's Times urges a third party "to fill the space between the conservative Santorum (or even Mitt Romney) and the left-of-center Barack Obama."
Friedman has written this column before.
This time, he has a coyly undeclared candidate, David Walker, formerly president of the austerity-mongering Peter G. Peterson Foundation. Walker, who served in a previous life as head of the Government Accountability Office, has been barnstorming around the country, denying that he is running for anything, blaming America's woes on Social Security, Medicare, and Federal deficits.
Walker even campaigned hard for votes in Politico's third party preference poll last October, contending that his personal campaign was only to drum up support for the idea of budgetary prudence, and coming in second. But it sure looks to me like the fellow is running for something. And nice to have Friedman as a cheerleader.
Normally, a single-issue crusader like Walker would not get to first base. But this time, a dubious group of Wall Street multi-millionaires has created a vehicle for the likes of Walker called Americans Elect, to reserve a third party spot on the ballot, with the candidate to be selected later. They claim that the goal is to enhance democracy and break partisan deadlock. They also count Friedman as a big booster.
Americans Elect has already raised $22 million, and has qualified its yet-to-be named candidate for the ballot in 14 states including California. With some 6,000 paid and volunteer canvassers, they hope to gain a ballot slot in every state. Later this spring, its 350,000 members will vote via the Internet for their choice of nominee.
However, if the self-appointed steering committee of hedge fund private equity magnates doesn't like the public's choice (Bernie Sanders? Ron Paul?), they get to override it. As Ronald Reagan once memorably said, I paid for this microphone. The brand name is Americans Elect, but it might as well be Money Talks.
If anything, Americans Elect and David Walker epitomize all that's wrong with American democracy. Americans Elect is the creature of multi-millionaires and billionaires, who now have the ability to spend infinite money putting their thumbs on the scales of American democracy thanks to the Supreme Court's Citizens United decision. Walker himself enjoys his enlarged megaphone thanks to the billion dollars that retired private equity mogul Pete Peterson put into the austerity crusade.
The deadlock preventing solutions to America's real problems is not the result of a symmetrical partisan stand-off. Republicans are surely farther to the right than any mainstream party in American history, but today's Democrats are hardly left-wing. The policy stalemate is simply the consequence of Republicans blocking everything Obama proposes.
We already have a centrist party. It's called the Democrats. Obama's Democrats are to the right of Richard Nixon on most domestic economic issues. If Democrats had not joined Republicans in financial deregulation, we never would have had the economic collapse of 2008.
Contrary to the claims of Friedman, Peterson, and Walker, what ails America is not the long term budget projections of Social Security or even Medicare, but the continuing knock-on effects of the financial collapse of 2007-2008. The weakness of the housing sector, combined with lagging wages and persistently high unemployment, is leading to a prolonged period of deflation. More fiscal austerity would only make things worse.
Reader Comments (1)
Just as Democrats joined Republicans in financial deregulation, becoming accomplices to economic collapse of 2008, too many progressives engage in bipartisan group-think with republicans, drinking the “free-Trade Cool Aid”. Free-Trade isn’t what it used to be just two decades ago, due to the following:
David Ricardo’s Destroyer of Comparative Advantage
In Chapter 19 of the 1817 classic On the Principles of Political Economy, and Taxation, David Ricardo mentions, in addition to war, removal of capital and a new tax as destroyers of the comparative advantage which a country before possessed in manufacturing. Administrations/Congresses of both parties have been unable and/or unwilling to connect-the-dots, between the declines in U. S. Global Competitiveness and the following changes since the 1990's:
- That has the effect of a new tax on U.S Exports, namely China's manipulation of the U.S. Dollar.
- A Change in U.S. Corporate Tax Regulations that led to the flight of capital from the United States.
- Enactment of Value Added Taxes (VAT), which tax U.S. exports, by an increasing number of our trading partners.
The first change, which dates back to 1995, is China's pegging its currency to the U.S. Dollar, in form this is not a tax, but in substance acts as a tax on all U.S. exports to all U.S. Trading partners, not just exports to China. Since China's economy has been growing multiple times faster the U.S economy, without China's manipulation of the Dollar, there would downward pressure on the Dollar and upward pressure on China's currency. The peg keeps the Dollars from declining as much as market forces would warrant and therefore results in an overvaluation of the Dollar. This overvaluation has the same effect as a tax on all U.S. exports. During the most recent “China U.S. Dollar Peg”, namely from July 2008 Through June 2010, total U.S. Exports were $3.508 trillion with exports to China being $145 billion. An over-valued Dollar was almost 14.9 times more damaging to U.S. exports than if the Renminbi was only kept undervalued. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.
The second is a change in U.S. Corporate Tax Regulations, dating back to 1997, which began allowing U.S. Corporation the deferral of payment of tax for foreign earnings, as long as those earnings were not returned to the United State. The result is not only the loss of U.S. tax revenue but also an incentive for the remove of capital and with capital the related jobs.
The third change is the significant increase in the number of U.S. Trading partners that have enacted Value-added taxes and dramatic increase in the dollar volume of U.S. exports subject to VATs. In 1990 U.S. exports were subject to consumption taxes levied by about 45 U.S. Trading partners but by 2010 by all but about 20 U.S. trading partners levied their consumption taxes, averaging 17%, on over $ 1.280 trillion of U.S. exports. The United States Government levies no Federal consumption tax on the over $ 1.948 trillion of exports into the U.S.
The unresponsiveness of U.S. Political leaders to these changes that David Ricardo, the father of classical political economics, warned; has subject U.S. businesses and workers to a similar plight as the frog in the boiling water parable. Other relevant warnings follow:
"It is not the strongest species that survives, or the most intelligent but the most responsive to change"
- Charles Darwin
"It is not necessary to change...survival is not mandatory"
- W. Edwards Deming
"The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to `political turmoil.' Pretty soon, I think there will be a big adjustment."
- Warren Buffett, January 2006
A commonality possessed by Ricardo, Darwin, Deming and Buffett is their ability to be system thinkers and therefore dots-connectors. Our political leaders’ lack of system thinking is the learning disability that must be overcome to restore the United States to its former greatness.