Wednesday, August 15, 2012

“The Issue”

Mitt Romney’s selection of Paul Ryan has changed the focus of the election and put “The Issue” front and center.

You may think The Issue is the economy.  Mitt Romney has been campaigning all along as though it is, but it is not.  The interesting conundrum of the economic argument is that wherever the economy is weakest, Obama is strongest.  The States with the weakest economies are all solid Obama wins according to the polls.  The groups with the worst economic performance are all solid Democrat supporters.  The cities with dying industries, dying downtowns, dismal economies and crumbling finances are largely Democrat run and Democrat leaning.  When Obama says “Our plan worked!” he may be referring to this apparent conundrum; the weakened economy has actually strengthened his support among his base.
You may think The Issue is jobs.  Republicans talk an awful lot about jobs, but here again, high unemployment does not appear to help them.  As with the economy, states and groups with the highest unemployment are all solid Obama territory.  More evidence his plan is working. 

To make a long story short, The Issue is not the deficit, nor healthcare, nor national security, nor is it energy, even though all those will play a role in the upcoming debate.  The reason Obama is strong in all those areas with high unemployment and dismal economic performance is because he has greatly increased federal hand-outs.  Jobs and economic growth are superfluous when the government gives you everything.   Not only did we have an existing mess in entitlements, Obama has made it much worse.  The Issue is entitlements.

We could shut down the entire federal government and still not be able to afford our entitlements.  Shut the military, the courts, all the government agencies, the FBI, CIA, NASA, EPA, DOT, the Senate, the House, and everything else except the existing entitlements and interest, and we’d still be insolvent in a matter of years.  In other words, we are living off our kid’s money.  Romney/Ryan believe that our thirst for entitlements constitutes an immoral claim on the labor of others.  They have a strong case.    

Now for the boring numbers part (skip to "Conclusion" if you are ADD/ADHD): 

·      Tax revenue has averaged almost exactly 18% of GDP for 60 years.  During that time, rates have been all over the place for every type of federal tax, but never has federal revenue sustained a long period above or below that 18% level.  Tax revenue is self regulating and fixed over time at 18% of GDP.  Taxing "The Rich" cannot solve this.  (top graph)        
·      Meanwhile, entitlements alone plus interest on the debt will bankrupt us. (bottom chart)

*Source: Heritage Foundation

Every time a politician has tried to even start a conversation about entitlements they have been quickly shouted down, sometimes by their own party.  The reason this is so is that we’ve had a kind of immunity from having to deal with entitlements and deficits.  We alone can print the world’s reserve currency.  We alone can issue US Treasuries.  And we alone can lead the world on interest rates.   This unique position has allowed us to live beyond our means without repercussions.  Our trading partners and financiers keep writing us the equivalent of second, third, and fourth mortgages on our debt while allowing us to refinance at historically low rates.   If only this could go on forever. 

But it can’t, and it is irresponsible and immoral to pretend otherwise as Obama has.  This is where Romney/Ryan come in.

Romney/Ryan are the first modern ticket focusing on The Issue during a campaign.  They are both articulate, informed, accomplished, and serious.  We’ll see if the public is ready to hear their message.  I sincerely hope it goes better than last time around.  You see, once upon a time we had another Presidential ticket which spoke frankly about entitlements.  They too were concerned with an entitlement that amounted to an immoral claim on the labor of others.  Their names were Abraham Lincoln and Hannibal Hamlin.