Politics and Pastors

First it was Barack Obama and Rev. Jeremiah Wright, then Rev. John Hagee and John McCain. Given the fallout we might wonder about the precarious relationship between spiritual and political leaders, but this would be the wrong lesson to apply.

The role of religion in post-60s American politics has turned into a one-sided affair, with the Republicans reaping the rewards of an important orthodox and evangelical constituency. Meanwhile, secular Democrats decry this relationship as a violation of some sacrosanct separation of church and state. Leaving aside the constitutional argument, the political one is usually less well understood.

The partisan turning point among evangelicals and other orthodox religious denominations occurred during the Carter presidency. Most evangelicals voted for the Southern Baptist Jimmy Carter over Gerald Ford in hope that he would be sympathetic to their social conservatism. But Carter ignored them in office and then threatened to deprive Christian religious schools of their privileged tax status because of discrimination. Feeling unjustly attacked, evangelicals voted overwhelmingly for Reagan in 1980 and they've been voting conservative ever since. But they were always traditionally conservative and secular Democrats have done little to appeal to these groups beyond scolding them for their participation in politics. In so doing, Democrats have mistakenly attributed religious voters' motivations to religious orthodoxy rather than recognize their legitimate political agenda. For example, evangelicals virtually ignored Pat Robertson's 1980 presidential bid in favor of a more secular, divorced, Hollywood actor.

Republican strategists, first Lee Atwater and later Karl Rove, quickly recognized the political potential of the conservative church-going population. Being strategists, they realized the true power of evangelism was organizational, not doctrinal. In a sense, mega-churches play a role for the political right that most approximates labor unions for the left — they educate, inform, and instruct. In recent decades this organizational capacity has benefited Republicans as evangelical congregations have expanded while labor unions have shrunk. But the bottom line is that religious faith has been inextricably intertwined with American politics since the beginning and religious voters' political preferences are as legitimate as any other in society.

This gets us back to pastors. The track record of ambitious spiritual leaders has been mixed and the list of prominent failings include Ted Haggard, Jim and Tammy Faye Bakker, Jimmy Swaggart, and the political fortunes of Pat Robertson and Ralph Reed. The error Barack Obama made was to have his political career so closely linked with the volatile Rev. Wright. John McCain is not so personally linked with Rev. Hagee, but his strategic error was to seek the easy endorsement of the leadership in order to shore up support among the congregation. True believers are suspicious of subordinating their faith to earthly politics and their politics can often diverge from their pastors. But their political power is not found in their religious beliefs, it's in their regular church-going behavior. One can get a targeted political message out more effectively than with an atomized constituency and the lesson here is that McCain should eschew high level endorsements of preachers and pastors in favor of a grassroots appeal to conservative religious congregations. This is a strategy not really available to or easily countered by Barack Obama. (However, Obama's advantage may lie in his successful use of the Internet.)

Democratic? What's democratic?

I read an article on the Democratic party's nomination process on RealClearPolitics today: "Democrats Should Be More Democratic," by Froma Harrop.

Ms. Harrop states

...the Democrats' discussion of delegate math is already moving to Electoral College math, and here the skies turn cloudier for their likely candidate. One fear is a repeat of 2000, when Democrat Al Gore got a plurality of the popular vote, but Republican George W. Bush won on the basis of the Electoral College tally. Not very democratic, was it?

If Democrats ever intend to again argue that the raw numbers should determine the next president -- and not an archaic system that can frustrate the democratic will -- they might start by setting a better example.

Ms. Harrop criticizes the Democrats for abusing a certain definition of democracy in their primary process, basically that the most popular votes is democratic and just. This is odd and harkens back to those misconceptions about how we choose presidents that proliferated after the 2000 election.

We don't have direct majoritarian democracy in the USA because in many respects it can be judged unjust. I repeat, democracy so interpreted can violate our liberal principles of justice. Certainly Ms. Harrop and those disgruntled anti-Bush Democrats are not arguing for an unjust system. But maybe, just maybe, they don't know it. I try to explain this in a previous post (What's Fair?), but I'll apply the main points here.

First off, the party primary system is a simple social choice mechanism to arrive at the presidential nominee most likely to win the election. It's not really about giving registered partisans an equal voice, unless of course the party so chooses to make that another of its objectives. (Unfortunately, as we've seen this year, these two objectives may conflict - then what do we do?)

Democrats chose primary rules that tried to split the difference between these two objectives: a widely participatory system of states' primaries with delegates apportioned according to the popular vote. (There is an odd inconsistency between caucuses and primaries, but that is a complexity that varies by state and goes beyond this simple summation.) To complement the primary process, the party also chose to award superdelegate voting status to certain party elites and backroom cigar smokers, just in case the first process went wrong. In other words, the Democrats wanted to give their registered voters a say in the selection process, but not so big a say that they might mess it up. Now, with the Obama-Clinton faceoff, the entire process has become a messy snafu.

Contrast this with Republicans, who award delegates on a winner-take-all basis. Fair? Unfair? It's a silly question. Their objective to choose a candidate was arrived at efficiently and most analysts believe McCain looks to be the perfect choice for the beleaguered Republican party's nominee in 2008. We'll see how well this holds true in November.

But my point is that a simple majoritarian voting rule is not inherently more "fair" than any other voting process. It all depends. In the presidential voting process the objective is to exercise the will of the people in selecting a national leader. If 60 million voters vote one way, and 60 million voters vote another, does the 120,000,001th voter's preference determine with any comfortable certainty what the will of the people is? When the popular vote is so close, it means the peoples' will is unclear. That's when the Electoral College rules become critical, as they should. When the popular vote is unclear, the default objective becomes how widely each candidates' support is spread geographically across the nation's 50 states. One may disagree with this objective, but it seems to make good sense given our nation's frequent historical divisions based on regional geography.

Policy Futures

A couple of articles caught my attention this week.

The first one was in the WSJ on May 19, "The Next American Frontier" by Michael Malone. Malone explains the economic transformations our society has experienced over the past generation and the implications this has for social and political organization. Our capitalist culture has become more entrepreneurial, breaking down some existing institutions of business and labor, while empowering individual innovators. This resulting shift toward apolitical market metrics for success and failure is lamented by some nostalgic for the past, writers like Thomas Frank. But the transformation is occurring because it plays to the wealth-creating strengths of a free society. We are becoming more a society of ideas than one of control over resources. We should figure out how to embrace the change for its opportunities, rather than impede it because of its uncertainties.

The second article appeared two days later in the WSJ by Paul Ryan, a Republican congressman from Wisconsin, titled "How to Tackle the Entitlement Crisis." Rep. Ryan suggests a principled program of policy reforms to address health insurance, Medicare and Medicaid, Social Security and the tax system. He offers an excellent roadmap for aligning our politics with the transformation outlined in the Malone article. In essence, his reform proposals focus on empowering the individual and freeing citizens to provide for most of their own needs. This is falsely derided as the YoYo society (for You're On Your Own) by the Democratic left, but individual initiative and self-reliance have always and still do underpin the American frontier spirit. We need only realign our more recent entitlement culture.

In a previous blog post (How to Win in 2008....and Beyond), I argued how our future politics would need to meet citizens' demands for individual autonomy, freedom of choice, and protection from risks we can't control, what is called systemic risk. (Such risks would include financial meltdowns, terrorist attacks, environmental disasters, currency runs, disease epidemics, etc. - all other risks can be managed by private insurance and asset diversification.) Technology has empowered our sense of autonomy, free choice and control. It's how we conduct our lives in product and service markets and what an entrepreneurial society demands from government. The protection aspect is where we've got more thinking to do.

In this respect, Rep. Ryan's proposals provide a consistent vision and any voters who believe we are headed in the wrong direction today should really give serious consideration to how they envision the future differently. No matter what anyone thinks, the New Deal is not coming back - it makes no sense in 21st century America.

No New Deal for Globalization

In their July/August 2007 issue, Foreign Affairs published an essay by Kenneth Scheve and Matthew Slaughter (a political scientist and an economist) titled, "A New Deal for Globalization." Their main argument was that increased globalization and open trade would require an expansion of national redistribution schemes that would compensate the losers (primarily labor) by taxing the beneficiaries of trade. I wrote a pointed critique at the time based upon my extensive research into the wide variation of national unemployment insurance across advanced industrial democracies (see Michael Harrington, 1998: Trade and Social Insurance: the Development of National Unemployment Insurance in Advanced Industrial Democracies, UCLA). My findings help reveal what were the true causes of the political responses to increased trade during the 20th century and contradict the basic premises for what Scheve and Slaughter advocated in their essay. I reprint that critique here:

Kenneth Scheve’s and Matthew Slaughter’s “A New Deal for Globalization” is an odd mismatch of a couple of old deals. As measured by the expansion of international trade, this is not the first go-round for globalization and their analysis of the politics would greatly benefit from historical comparisons. This is important both for similarities and differences between the present and the past.

At the turn of the last century industrializing European nations had been struggling with the economic and social effects of globalized markets for more than a generation. Many small European nations, like Belgium, the Netherlands, and Switzerland had trading sectors that greatly depended on foreign markets over which their governments had very little control. As trade fluctuated, so did domestic employment, giving rise to political demands for protection. The Grand Compromise, to which the authors allude, was a trade-off of labor compensation subsidized by public and private contributions to universal social insurance schemes in return for increased trade openness.

The conventional narrative claimed these compromises were engineered by trade unions and left labor parties. In actuality, a cross-national case study comparison reveals that international manufacturers and resource exporters had more important political influence in fostering these compromises. Trading industries favored the cross-subsidization of labor compensation schemes that primarily benefited their industries’ share of national wealth. The result was a significant expansion of world trade and economic growth so successful that it attracted imperialist regimes to pursue expansion by other means. The resulting war confounded trade agreements leading to the disaster of 1930s protectionism, but the lesson of managing trade was learned. However, the logic of these programs was not income redistribution, as that would not have attracted the support of capitalists. Rather, these schemes promoted national savings pools to manage the ups and downs of trade over time. They’re like saving for a rainy day.

Countries that were less trade dependent, such as the United States and Japan, instituted their own social insurance schemes much later for reasons stemming from the world depression. These were primarily redistributive schemes that had little to do with globalized trade. Scheve and Slaughter try to conflate these two logics, which is why I say theirs is a mismatch of two old deals.

The question is how can we apply the lessons of history to our current difficulties over globalization? The authors suggest a redistributive scheme of more progressive taxes on all labor incomes. Now, there are probably many good reasons to reduce the regressive tax burden on labor, but globalization is perhaps the least compelling. In fact, redistributive taxes on labor may do nothing to promote trade while simultaneously risking a decline in domestic investment, production and economic growth.

The true problem of globalization results from the maldistribution of the gains and losses from trade across the national, and indeed even the international, economy. But it’s not at all clear that globalization is the primary cause of growing income disparities, so the connection between income distribution and globalization is tenuous at best. A more likely culprit is the winner-take-all economy and the concentration of the returns to capital, of which globalization is but one contributing factor. However, the effects of redistributive tax schemes are well-known: they restrain investment and distort the allocation of labor and capital resources. The inevitable result is lower national wealth – the question is whether this political-economic trade-off is optimal. I will argue it is not as there are better trade-offs to be made.

First, historically, the politics of trade openness only compensated those directly hurt by trade with generous unemployment benefits and retraining. This is the proper nature of social insurance programs and why they make more economic sense than pure tax transfer schemes. Why should a general scheme that redistributes income from high to low for all workers be associated at all with the costs and benefits of trade? Why would such a scheme ever cause workers to stop favoring protectionism? A more rational strategy for workers would be to demand redistribution and protectionism in tandem.

Second, it is highly unlikely that reducing labor taxes will allow American workers to compete on labor costs with the international labor pools in China, India and Central America. More likely it will cause more jobs to be created in the non-tradables sector at equal or lower wage levels, increasing production and profits in these sectors. Workers gain little and we get more workers whose taxes don’t pay for their social benefits.

Third, progressive labor taxes are easy to avoid. At the management level it is a simple matter to substitute alternative compensation schemes to avoid labor taxes altogether. As the authors note, “income growth at the top is being driven by corporate profits, which are at nearly 50-year highs…” Top CEOs now make more in one day than the average worker makes in a year. Even if one believes this is not an economic problem, it most certainly is a political one. So let us accept that the increase in income inequality and the most direct effects of globalization are both reflected in the rise in profits. This cannot be overemphasized. The big gain in incomes in the last two decades has come through profit participation through stock options. (High salaries also come from the same slush fund of corporate profits.) When options are exercised, the income is all capital gain. For example, Steve Jobs’s salary in 2006 was $1, but his total compensation was $646 million, the value of his options. Increased labor taxes will not have much of an impact on Mr. Jobs and the compensation packages of all large earners will most definitely adjust to avoid redistributive taxes. Thus, the $256 million of tax revenues that the authors expect will likely never materialize and the median wage income threshold will fall to even lower levels. (For true redistribution, what the authors really want is a wealth tax, perhaps in the form of a flat consumption tax with a high threshold to protect lower income classes. But this has nothing to do with trade.)

It is time to think outside the box. The future of globalization will not be a return to national universal income compensation schemes based on wages and salaries. The problem we need to overcome with globalization is the mobility of capital relative to labor. We can see the disorderly response to this problem in illegal immigration and outsourcing. But compared to a century ago, the difference today is that labor incomes are the wrong focus for developed nations. Citizens of capital-rich, highly skilled labor economies need compensation schemes that enable them to participate in the profits gained from the international rationalization of production. Yes, labor taxes at the lower levels should be reduced, but the reason is to empower ordinary workers to accumulate capital assets. As citizens, all workers need to be shareholders in national wealth, not mere labor costs. Perhaps George W. Bush was right with his Ownership Society.

How this participation is accomplished is the subject of entirely different policy argument, but the direction should nevertheless be clear.

Frank Gets it Wrong Again

Thomas Frank, author of What's the Matter with Kansas, had an op-ed published in today's Wall Street Journal titled, "Our Great Economic U-Turn." But, just as he misinterpreted red state politics in Kansas, Frank mischaracterizes the transformation in the US and world economy. By his essay’s very title Frank implies we can make a 180-degree turn to some idyllic post-war Golden Age of laborism. But the mid-20^th century period was the historical anomaly. With the developed world outside the US devastated by two horrific wars, the US economy alone stood unchallenged. US capital and labor shared the rewards because they could afford to and wage benefits expanded. But this age ended in the early 1970s and will not return, as Frank suggests, with a few policy changes in Washington. The rest of the world has joined the game and US relative economic dominance is reverting to a more balanced norm. This is not a bad thing, as the developing world will attest.

In the US, the lost decade of the 1970s led to popular demand for the structural economic adjustments unleashed by the Reagan revolution. What Frank correctly identifies are the distributional challenges this has forced upon our economic and social institutions. Simply put, capitalism rewards capitalists and labor is an input cost. So, the opening of the world economy has weakened the bargaining power of organized labor to extract high wages. But the idea that government should tip the scales toward labor is a notion at odds with economic reality. A return to New Dealism will only restrain our competitiveness and accelerate our relative economic decline. Instead, our policies should unleash wealth creation by empowering citizens to participate in capitalism as something more than an input cost. Rather than reverting to age-old class divisions, Frank should focus his attention on how policy can apply the logic of capitalism to encourage workers to accumulate capital assets and participate in the world economy as true capitalists. We do this indirectly with retirement assets, but applied directly, shared wage and capital incomes can moderate distributional inequalities.

Lastly, Frank should reserve his ire not for the plutocrats, but for the political class that has obstructed private ownership and capital accumulation for the “have-nots” in favor of government-driven redistribution and political dependence. They have dismissed these ideas as the YoYo (You're On Your Own) society rather than the self-reliant DIY society consistent with the true American spirit. And their promise of European social welfarism is certainly a false one.

Yes, the rules of capitalism do favor the capitalists, so let’s open up the game to those truly in need. Is that not an American liberal value?

A Tale of Three Primaries

With the most recent primaries in Indiana and North Carolina the pundit class has closed the books on the Democratic nomination, crowning Senator Obama with an unassailable lead. Of course, this is based on strategic calculations of the super delegates’ political logic rather than the clear preference of the voters. In this they are probably right, baring some unforeseen disaster for Obama. But there are some interesting details hidden in these votes we should carefully note before we leave the scene.

Most of our received wisdom on elections comes from exit poll sampling, often a highly subjective and error prone art. Exit polls also tend to bias explanations toward identity characteristics of voters—things like race, age, gender, income, and religion—because these data are more easily collected in surveys. A more fruitful and complementary approach is to compare votes to census data at the county level. This gives us a complete population dataset, rather than a sample approximation.

The last three primaries give excellent insights into the political mood of the country when compared to the last two presidential elections. In addition, they’ve occurred at a turning point in the Democratic primary season when both candidates have been tested and voters are paying close attention. While none of the individual states of PA, IN, or NC are truly representative of the nation (they all tip Republican), taken together their county profile is remarkably in tune with the average profile of all three thousand-plus US counties. This applies to mean population density (240 vs. 245 inhabitants/sq. mi.), median family income ($45K vs. $42K) percentage of white (86% vs. 85%) and black households (10% vs. 9%), median age (37 vs. 37), and percentages of married households (56% vs. 55%) and female heads-of household (10% vs. 10%). In other words, the 259 counties in these three states look remarkably similar to the national profile. So, taken together, they make an ideal sample for the nation as a whole.

What does this method of analysis tell us? First, it tells us that voting preferences are unfolding in patterns uncannily similar to the past two polarized elections, with a few notable, though not necessarily encouraging, differences.

In the 2000 and 2004 elections we had the red-blue pattern of county results that largely owed to divisions between rural and urban, married and unmarried or female heads-of-household, and a residual attributed to ideology (article here). In the tri-state primary votes these divisions still hold but have been overwhelmed by divisions of class, race and gender. The same old red-blue pattern holds fairly true. (In case you haven’t guessed, Clinton is the red candidate and Obama the blue—another reason we should expect Obama to decisively close out the nomination.)

This interpretation is confirmed by many analytics and comparative statistics. Clinton counties are strongly and positively correlated with Bush counties, while Obama counties are strongly correlated with Gore and Kerry counties. A simple regression equation matching county characteristics against vote outcomes across all 259 counties shows almost all of the voting choice can be explained by white and black households, married households, female heads-of households, median age, median family income and population density. The most significant variables were black households, median family income and female heads-of-household. These results are confirmed by exit polling showing that Clinton captured lower and middle class whites, women, and older married voters living in rural and outer suburban communities. Obama won among young voters, blacks, and single urbanites.

So, what does this mean in terms of the general election? One, though Democratic primaries only capture Democrats, it seems they vote in many ways similar to the entire electorate. Two, Democratic voters are largely divided by identity politics: race, gender, age and marital status. This makes for a hazardous coalition in national elections where the white, married, middle class is the dominant group. Three, Obama’s weakness was most glaring among working class married whites. Four, Clinton’s strategic error was to look past the primaries and gear up for the general election by moving towards the center on the issues. This left her vulnerable in primaries that are driven by more pure ideological partisanship. Both Clinton and Obama are perceived as far to the left of the general electorate, but without the Obama challenge Clinton could have portrayed herself more left-of-center against McCain’s right-of-center. Five, despite the rhetoric of post-partisanship and unity from both presumptive nominees, one wonders if we’re actually headed for the same polarized 50-50 election where electoral politics once again trumps more important issues of governance.

Pew Research Poll on Ideological Positions

Pew recently released a poll on voter opinions of the Democratic nomination race. (Link here.) Polls give us momentary snapshots of voters attitudes that can change from day to day, but this one had an interesting result on ideology that's been unwavering since the 2008 presidential race began. This is the perception of ideological positions of the different candidates. Most know that in a two-party system the candidate closest to the median voter on the issues stand the best chance of winning a plurality in the election. We see the table below what the problem has been from the start for Democrats: both of their candidates are ideologically identical and yet far to the left of the electorate.


















So, from the self-assessment of voters, America is a center-right country, as has been true for the past 27 years. Yet moderate Democrats have been eliminated from contention by left-wing activist groups. On the Republican side, McCain prevailed over more ideologically pure conservatives and thus stands much closer on the issues with the median American voter. It doesn't mean he will win, but it does mean he is much better positioned for the general election than either Clinton or Obama. Of course, when the Democratic nomination is decided, the winning candidate will tack quickly toward the center on the issues, but this necessary flip flopping doesn't bode well for how candidates are perceived by moderates and independents.