Tim's Opinion Blog: The GOP Debate and Obama’s Speech Review

As promised, here’s my review of the GOP debate and Obama’s speech. I also was tweeting during both events and those logs are at the end of this post in case anyone’s curious.

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This was a lively debate. It was fun viewing. The candidates showed a unity against Barack Obama that the GOP sorely needs while simultaneously setting themselves apart from each other. They were collectively more aggressive towards each other than I expected, but that’s a good thing. I was surprised at how much praise Obama got. Not only did he get credit for suspending EPA regulations as I predicted in my preview, but also for keeping Guantanamo Bay open. One particularly interesting point was Newt Gingrich defending Rick Perry’s book as a book of ideas rather than a presidential plan. Mitt Romney and everyone else had some zingers, too. The Ronald Reagan tribute was also very well-done, and as usual, Brian Williams showed why he’s the best newscaster in America. His hand-off to Rachel Maddow and Chris Matthews was my cue to call it a night.

I now see four tiers of candidates in the GOP race. The GOP debate reaffirmed my belief that the race is effectively down to two candidates, namely Romney and Perry. They were clearly the strongest. Obviously, the Romney camp will say Romney won and the Perry camp will say Perry won, but the two represent the divide within the GOP camp between a staunch conservative in Perry versus a right-of-center Romney. Personally, if I had to pick a single winner, it would be Romney because I believe he effectively kept Perry’s charge at bay during the debate. Part of that relates to this being Perry’s noticeable case of first-debate jitters and the fact that he’s not a particularly strong debater to begin with, whereas Romney is far more seasoned and stronger in debates. Perry came out strong, but I think Romney got the better of him at this debate. As Perry gets more in his groove, this may change, yet for now, Romney is still the man, and, “To be the man, you have to beat the man,” as Ric Flair says.

Perry’s rise has relegated Michelle Bachmann to the second tier of the race. She had a solid performance, but Perry has clearly stolen her thunder. I originally was going to give Bachmann her own level, but I was so impressed with Jon Huntsman’s surprisingly strong performance that I’m putting him on her level. Think of it as though Bachmann is at level 2+ and Huntsman is at level 2- because Bachmann still has way higher poll numbers than Huntsman. Huntsman was forceful and decisive with some very good ideas. He also very effectively handled the questions from Williams regarding his comments about the GOP, managing to dodge that bullet without naming names and without looking like a total coward (contrast that to how Tim Pawlenty flubbed with his Obama-Romney-Care point at a debate, which was a good point, but he looked like a total pushover). Concerns about Huntsman’s toughness should be put to rest after this debate. Bachmann and Huntsman are still in the mix, but they’re longshots. They should both hang in there, but they should also keep in mind their potential as vice-president picks.

Ron Paul is on a level all his own. Paul is probably not even in the same building as the rest of the race. As I retweeted, he’s a pure Libertarian who doesn’t even try to pretend to be a Republican. Paul is pretty much the godfather of the Tea Party movement. His performance likely endeared him to the Tea Party, but I don’t think it did him any favors with the rest of the GOP. He tended to ramble and I think he came across as a bit too far right. Paul is too libertarian even for me. Realistically, he has very little chance of winning the primary, much less the general election, and I don’t see him being seriously considered as a vice-presidential pick.

Gingrich, Rick Santorum, and Herman Cain are in the bottom level (along with the others who didn’t appear like Buddy Roemer), and the debate left me thinking they should bow out of the race sooner rather than later and hope to be considered for the vice-president spot because they have no realistic chance of winning the primary. Gingrich was the strongest of the three, I’d say. I suspect if Gingrich, Santorum, and Cain dropped out, most of their supporters would gravitate towards Perry, Bachmann, and maybe even Paul, though I also could see some Gingrich supporters shifting towards either Romney or Huntsman.

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And now we’re onto Obama’s speech. The American Jobs Act he proposed is a $450B effort to stimulate the economy that I think will be another epic failure. It was your typical Obama speech in that it was heavy on poetic rhetoric, but light on details and new ideas. The American people are tired of rhetoric and they want results. He brought a few decent new ideas, but most of what Obama laid out in this speech was stuff that has already been tried and failed to stimulate the economy. In essence, he was, for the most part, doubling down on some of his previous policies under the notion that they were ineffective not because they were poorly conceived, but because they weren’t big enough and/or haven’t had enough time to succeed.

Before I get into all that, I was particularly disheartened when he said that America can be #1 again. That, along with an abundance of other evidence, shows he thinks America is no longer #1, which is false. We still are whether he believes it or not. I’ve love to tell him, “I find your lack of faith disturbing.” I hope people picked up on that and I hope he gets nailed for it. I don’t expect it to hit him like malaise did to Jimmy Carter, however.

As I discussed in my preview, infrastructure spending, in theory, should work as an economic stimulus, but it doesn’t. This is an example of a failed policy in which Obama is doubling down. Obama’s plan calls for $80B in infrastructure spending ($30B for school modernization and $50B for roads and bridges). He tried this with his first stimulus bill. It didn’t work then, it didn’t work in the 1930’s when FDR tried it, and it won’t work this time, either. It’s a necessary investment for America’s future, but it won’t boost the economy meaningfully now.

The extension and expansion of the Social Security tax cut for workers is a nice boost to our paychecks. Keeping more of my money is fine by me. Last year, the rate was 6.2% for the worker, versus 4.2% this year and 3.1% proposed for next year. Employers would see no change unless they have payrolls smaller than $5M/year, in which case their tax would drop from 6.2% to 3.1%. This reduction for small employers is a good new addition. These cuts would be in effect for only 2012 unless they’re renewed.

I see three problems with this measure, however. First, it is set to expire unless renewed. Businesses don’t usually hire with a one-year timeframe, so they have to assume that these cuts will expire and factor that into their hiring cost calculations. This is a prime example of the regulatory and tax uncertainties that businesses face. Will they or will they not be renewed? It works to partially hold business decisions hostage to Washington. 3.1% may not sound like a lot, but labor is the dominant cost in many industries. The second problem is it will exacerbate the drawdown in Social Security. I’m guessing it will cost us at least three years’ worth of Social Security solvency based on the premise that the 2% cut for workers that Obama did this year cost us a year. The third problem is the original tax cut didn’t work to stimulate the economy because people naturally tend to save temporary gains versus spend them. If Obama locked this in for a few years, people may be more inclined to spend and thereby stimulate the economy. It’s a step up from George W. Bush’s $600 check to everyone in America, but not by much.

Also, on the old ideas front, Obama has also proposed aid to state and local governments to keep teachers on the job and extensions of unemployment benefits. These are portrayed as measures to guard against further job losses by keeping the unemployed spending money and keeping the teachers from becoming unemployed. He plans to pay for all of this by allowing the Bush tax rates to expire for the rich and raising taxes on the oil industry. To be honest, I can’t understand how this bill can do all this and not add to the debt, as Obama promises. The math doesn’t add up and relies on savings showing up in the future and the assumption that the super-committee can do things the way Obama wants them to. I also don’t see where the pro-Obama economists are getting the idea that this bill could add 1-2% to GDP.

It wasn’t all old ideas, though. There were a couple new ideas that have promise because they indicate that the government is finally waking up to the reality that structural unemployment is a major problem here (refresher: this is when there’s a major mismatch between the skills employers are looking for and the skills of the unemployed). What I liked in particular was Obama starting to focus on the long-term unemployed, who make up over 40% of the total unemployed population. Obama proposed tax credits for hiring workers unemployed for over six months and some government job training programs. I don’t think either of these will be terribly effective in the short term, however, because companies still lack the confidence to hire, retraining can take months or even years, and the further extension of unemployment benefits will reduce the incentive for the unemployed to seek work/retraining. Obama also mentioned trying to make it easier for people to refinance, which is a great idea, but from what I can tell, it’s out-of-scope here because it’s probably not going to need to be passed by Congress.

It strikes me as a highly politicized bill. I think this bill is designed to do four things and I think these things are plain as day when we remember that, as always with Obama, anything he does is about how it helps him get reelected. First, I view this bill as a handout to several elements of Obama’s base, namely the labor unions (through infrastructure spending) and the teacher unions (though the local and state aid). Second, the bill is designed to pick off some of the undecided voters (the Social Security tax cut extension for workers and the unemployment benefit extensions for the unemployed). Third, the bill and the speech were designed to ratchet down expectations. Fourth, the bill aims to punish Obama’s enemies in two ways. It raises some taxes on Obama’s economic enemies, like the rich and the oil industry, and in offering a couple things to try to entice some GOP support, he’s trying to paint the GOP into a political corner. Will it work? I don’t know.

Even if the speech was about a highly-politicized bill that’s filled with mostly old ideas (and a couple new ones) that probably won’t work very well, at least Obama is actually trying to lead versus sitting on the sidelines like he did during the debt ceiling debacle. I’m under the impression he’s going to actually try to craft this into a bill for Congress.

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TimABRussell Tim Russell

Brian Williams appears to have handed it off to Rachel Maddow and Chris Matthews. That's my cue to go to bed. #ReaganDebate

Friday, September 9, 2011

The GOP Debate and Obama’s Speech Review

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