A Free-Market Case for Ending Too Big to Fail

In the Daily Caller, I explore a free-market argument for ending Too Big to Fail:

The impetus for ending TBTF would not be to punish Wall Street but to restore it. In the current situation of opaque and indefinite government support, no one knows who’s going to be the next Lehman Brothers (a big bank that was allowed to fail). Some well-connected players may feel free to gamble under the belief that Washington will back them if those bets go bad, but one or more might be wrong in that assumption: their lucky firm could be the one Washington decides is to be the sacrificial lamb before bailing out other big banks. The liquidation of that firm could wipe out the wealth of its shareholders and also cause many traders to lose their jobs. If this bank had not assumed that it would have government protections, however, it might have acted more prudently. Fear of failure is one of the greatest sharpeners of prudence in a capitalist marketplace; by putting the safety net of government bailouts under certain banks, we at once encourage them to be more reckless and to make less sound investments. This is a bad outcome from both a civic and an economic perspective.

Republicans would benefit politically from ending TBTF. Such an enterprise would appeal to popular dissatisfaction with the banking system. But there is an even more pressing reason for trying to achieve this aim: ending Too Big to Fail would be a defense of the free market. In 2008/2009, the banking system came closer to being socialized than at any time since the Great Depression. If we are interested in ensuring a market-oriented banking system, we must apply the principles of the market to the banking system.

 Read the rest here.

On a similar note, the cover story of this week's Weekly Standard explains the various ways in which Dodd-Frank accelerates the concentration of capital in a few giant banks.

Debate III

This debate was not as fierce as the last one.  One of Obama's aims tonight was to try to delegitimize Mitt Romney and make him appear unfit as commander-in-chief.

Did he succeed?  If snap polling is any judge, no.  Mitt Romney came out of tonight still seeming like a very plausible commander-in-chief.  No matter what the spin room might be saying, that outcome can't make the Obama campaign too happy.

By the Way

Romney and Obama got into a heated discussion over gas prices.  The president rightly noted that economic uncertainty at the beginning of his term helped lower gas prices, but Romney also rightly noted that the White House hasn't exactly been proactive in trying to deliver lower gas prices to Americans.

But still: a gallon of gas cost an average of $1.79 when the president took office.  As of September 2012, it averaged $3.86 a gallon.  According to BLS statistics, gas has never been that expensive in September.  Never.

Hard-Fought Second Debate

Romney and Obama's second meeting was a bit more contentious than their first.  Unlike in the first debate, the president came ready to battle.  Obviously, the left's demands that he become more aggressive and assertive were successful.

Romney started out strong, and his final remarks ended his showing tonight on a high note.  Romney's remarks on the economy, college graduates, trade policies, and the current state of the middle class were often very effective.

There is an uncertainty: this was a very contentious debate, with Obama and Romney talking over each other at times.  I'm not sure how this will play with undecideds.  Some might view Obama as less presidential for getting into such heated exchanges, but they could also become aggravated with Romney and view him as too belligerent.  Or it might not make any difference.


Romney had the momentum going into this debate.  I'd guess that the president did well enough tonight for his troops on the left to rally behind him.  I'm not sure I can say Obama won the debate, but he didn't lose it decisively, either---at least compared to two weeks ago.  And Romney might still have the momentum.

UPDATE: Polling suggests, and some in the Romney campaign have been quick to emphasize, that Romney dominated on economic questions.  For example, in the CBS snap poll after the debate, Romney won the economy 64-35.  I've also heard that there's been some potentially positive movement for Romney among undecided women voters after this debate.  More polling will show if that movement is realized over the next week or so.

Will: Too Big to Fail an Opportunity for Romney

George Will explores the virtues of Romney taking on Too Big to Fail:

If in four weeks a president-elect Mitt Romney is seeking a Treasury secretary, he should look here, to Richard Fisher, president of the Federal Reserve Bank of Dallas. Candidate Romney can enhance his chance of having this choice to make by embracing a simple proposition from Fisher: Systemically important financial institutions (SIFIs), meaning too-big-to-fail (TBTF) banks, are “too dangerous to permit.”

Romney almost did this in the first debate when he said the Dodd-Frank Act makes TBTF banks “effectively guaranteed by the federal government” and constitutes “the biggest kiss that’s been given to — to New York banks I’ve ever seen.” Fisher, who has a flair for rhetorical pungency, is more crisp:

There are 6,000 American banks, but “half of the entire banking industry’s assets” are concentrated in five institutions whose combined assets amount to almost 60 percent of the gross domestic product. And “the top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago.” The problems posed by “supersized and hypercomplex banks” may, Fisher says, require anti-obesity policies equivalent to “irreversible lap-band or gastric bypass surgery.” The land of TBTFs is “a perverse financial Lake Wobegon” where all crises are “exceptional,” justifying “unique” solutions that are the same — meaning bailouts. This incurs “the wrath of ordinary citizens and smaller entities that resent this favorable treatment, and we plant the seeds of social unrest.”

Smith Gains in Pennsylvania

Bob Casey  won a decisive Senate victory against Rick Santorum in 2006, and many analysts had assumed that he would have a fairly easy path to reelection against Republican Tom Smith in 2012.

But some recent polling has suggested that Casey might have a slightly harder road ahead in his reelection challenge.  The latest Philadelphia Inquirer poll has Casey with a 10-point lead (48-38), which is still pretty solid.  But an Inquirer poll in August gave him nearly a 20-point lead.  And Casey has fallen below the 50% margin.

Indeed, no recent poll has given Casey over 50%.  And some other recent polls have this race down to single digits.

A continued strong performance by Romney could help push Smith over the top.

VP Debate

Biden's performance in tonight's debate is likely to fire up the Democratic base---in noticeable contrast to the president's showing last week.  For the most part, Ryan held his own.  It remains to be seen how much this debate changes the dynamic of the race (vice-presidential debates usually don't have the biggest effect).

Some other thoughts from Ed Driscoll, Hot Air, Justin Green, and Bill Kristol.

Same Boat II

A surging Mitt Romney might have some benefits for his fellow Republicans in other races.

Scott Brown, for instance, might be seeing his edge against Elizabeth Warren being renewed.  Prior to the first debate, a WBUR/MassINC poll had Obama up 28 points over Romney (60-32) and Warren up 4 points over Brown (49-45) in the Bay State.

In a WBUR/MassINC poll taken after the debate, Romney significantly ate into Obama's lead in Massachusetts, knocking it down to 16 points (52-36).  And Brown took a 3-point lead over Warren (48-45).

Significantly, both polls use the same partisan splits (36D/12R/52I).  Also interestingly, Brown's and Warren's favorability/unfavorability ratings remain about the same across both polls.  Brown's favorability rating does inch up a couple points, but I don't think that increase is enough to explain a 7-point improvement in his standings against Warren.

What we might be seeing in Massachusetts is an increasing sentiment among voters that Republican policies might work for them as well as for the country as a whole.  Because of this belief, they are more willing to support Republicans on the Congressional level.

Time will tell if other voters in other states feel this way.

From the 47% to the 100%

Over at The Daily Caller, I have a column up explaining the deeper ramifications of Romney's win over Obama in the debate last Wednesday.  Romney has moved toward advocating a sense of conservatism that can benefit everyone:

But rhetorical style alone cannot explain Romney’s win. Over the past week, Romney has decisively turned his back on a faux-Randianism, one that says conservatism should be the deification of the wealthy few, the castigation of the poor and elderly as parasites, and the elevation of selfishness and pride over community and humility. Romney’s performance in Wednesday’s debate offers a striking counter to the sentiments of the infamous 47% video, which he repudiated on Thursday.
Rather than attacking Social Security and Medicare as instruments of financial slavery (as some in the faux-Randian right view them), Romney defended their value and pledged to make them sustainable. Dismissing the dogma that marginal tax cuts will always pay for themselves (something that even a tax-cut hawk like Paul Ryan has also implicitly rejected), Romney pledged that he will not support a tax-cut plan that adds to the deficit. Instead of arguing that government regulations always harm the economy, Romney stressed that regulations are essential for a market economy. Faced with accusations that his policies would lead to a Hobbesian state of nature, Romney cited his own record as governor of Massachusetts.

Read the rest here.

More on Free Trade

Eamonn Fingelton looks into some of the facts of the international auto market in Japan:

Yet facts are facts. Here are a few which, though they remain hidden from most Americans, are widely known to media commentators, diplomats, Japan scholars, and of course aspiring presidential candidates:

1. The Japanese government has used a plethora of constantly evolving regulations to keep the combined share of all non-Japanese automakers to just 4 percent of the Japanese market. The share never varies, whether the yen is strong or weak. (The yen is up nearly 50 percent against the dollar in the last five years.)
2. The Detroit corporations, in common with all major automakers, make many cars in Europe configured for Britain’s drive-on-the-left roads, and by extension for Japan’s. They also make countless components and assemblies that have been shut out of Japan for no other reason than that they are not made there.
3. Even Volkswagen, which sells broadly as many cars around the world as Toyota, has been allocated—that is the right word—just 1 percent of the Japanese market; by contrast Toyota’s share is close to 40 percent. (Volkswagen is lucky, incidentally: Hyundai’s share is 0.02 percent and Daewoo’s 0.003 percent, and this in a country where close to 1 percent of the people are ethnic Koreans.)

Race Tightening?

National Journal has a new poll out showing a tie between Romney and Obama.  This poll adds to the seeming trend of the race tightening.  Romney's new focus on the economy may be working.

About That Video...(II)

The Daily Caller digs up video of an Obama speech from 2007.  Hot Air suggests that some other more recent scandals and setbacks might also be focused on.

American Stagnation: The Need for Renewal

I have a column up at The Daily Caller examining the current stagnation of the US economy:

In the life of almost all civilizations, a time comes where, as Yeats put it, “things fall apart.” The internal principles and assumptions that used to seem to work begin to break down. If the engines of growth have not ground to a halt, they certainly could use some fresh oil: stagnation replaces new opportunities. Everything that used to work suddenly doesn’t. What would have been an easy projection of power settles into a stalemate.

The United States has long been used to a steady pace of growth. A vibrant economy created more opportunities for Americans of all walks of life; the rising tide of growth really did lift all boats. This economic growth gave hope both to the nation as a whole and to distinct individuals. According to the U.S. Bureau of Economic Analysis, real U.S. gross domestic product (GDP) grew at an average annual rate of about 3.5% between January 1947 and January 2001. This rate of growth allowed for a doubling of the economy every 17-20 years.

Recent history tells a very different story, however. According to the BEA, between January 2001 and January 2012 the economy grew at an average annual rate of just 1.6%, less than half the average annual growth rate of the second half of the twentieth century. Nor can we entirely blame this stagnation on President Obama or even the Great Recession. During President George W. Bush’s presidency, from January 2001 to January 2009, annual GDP growth averaged 1.4%. Even during the period of growth between 2001 and 2007, annual GDP growth was just 2.7%. The supposed boom times in the past decade have lagged behind the average growth of the past; only about one year of the Bush presidency saw GDP growth greater than the average of the past. The Great Recession has only underlined the lost economic ground: as of April 2012, real GDP had only increased by about 2% since the economic peak of mid-2007. The U.S. economy has barely grown at all since 2007; that’s almost five years of average economic growth well under 1%.

Read the rest here.  Our current troubles really go back more than four years, and, in order to face them, we might need to find some new solutions or at least revise some old ones.

As I've suggested elsewhere, the restoration of the US's economic architecture in its broadest sense will likely be a crucial enterprise.

Ace notes the connections between law and normativity.

Some economically grim thoughts from Jim Pethokoukis.

All in This Together

In the wake of a tough period for Mitt Romney, various Republican candidates for a number of offices are suddenly finding themselves in increased danger.  Consider the Senate.

In Wisconsin, former governor Tommy Thompson seemed to have a strong advantage.  Now, many analysts rate this race---which could have been a straightforward pick-up---as a toss-up.  George Allen is struggling against Tim Kaine in Virginia for another seat held by a retiring Democrat (Jim Webb).  Missouri, which should have been an easy pick-up, now has edged closer into the Democratic column due to some of Todd Akin's statements (gaffes sometimes do matter a lot).

Republican Senate incumbents have also faced a troubling wave of polling.  In Massachusetts, Scott Brown's edge against Elizabeth Warren has slipped a little.  Nevada's Dean Heller's significant polling lead has now slipped to a point or two; a Rasmussen survey in July found him leading by nine points, but a more recent Rasmussen survey has him down to one point.

At the beginning of the year, when President Obama was viewed as being more vulnerable, Republicans had a better-than-even shot of taking the Senate.  Now, RealClearPolitics finds only 43 Republican "safe" or lean Senate seats with 9 toss-ups.  So Republicans would have to win at least 7 of 9 toss-ups in order to have a chance of taking the Senate (and that's only if Romney wins in the general).  The House tells a somewhat similar story.  Obviously, Republicans have a much better chance of holding the House than they do of taking the Senate.  But, as Bill Kristol notes, some recent polls have shown Democrats with a lead on the generic ballot (even Rasmussen's generic ballot polling gives Republicans a thin one-point lead).  Such a polling lead does not always translate to a majority in the House, but it does suggest possible dangers for the Republican majority.

The upshot of all of this is that Congressional Republicans might have a hard time decoupling their fates from that of Mitt Romney.  As Romney has slipped in the general election season, various candidates have also seen an increase in the weights holding down their electoral hopes.

Salon's Steve Kornacki and others have highlighted the following danger for Romney: that Beltway Republicans and other activists will view him as a lost cause, thereby jumping ship to focus on statewide and local races.  Kornacki reminds us that such an Operation Overboard occurred during Bob Dole's 1996 campaign against Bill Clinton.  At least a couple factors would suggest that this kind of abandonment would be unlikely to occur this time.  Romney is in a much stronger position against Obama than Dole was against Clinton, and Clinton had more bright spots to his record than the current president.

With things as close as they are on the presidential level, it would likely be counterproductive for various activist groups to turn their backs on Romney to focus on statewide races.  The weaker Romney seems on the top of the ticket, the more hurdles down-ticket candidates are likely to face.  Or, the stronger Romney is, the stronger many other Republican candidates will likely be.

So many Republicans are in the same electoral boat this year. Abandoning ship could simply leave Congressional candidates thrashing in the water, further from their electoral destinations than ever, as the waves slowly send them backwards.

The good news for Republicans is that the presidential race is still very winnable.  The Romney campaign's renewed focus on economic restoration---one edging toward offering economic solutions---could change the electoral dynamic in Romney's favor.  An affirmative, realistic plan for growth and renewal could become a vessel to carry Romney and other Republicans to the shore of victory.

(I acknowledge that many conservatives have expressed some skepticism about recent polling, but even polls put out by conservative-leaning organizations do not show a substantial lead for Romney---or even a lead at all.  The most recent FOX News poll had Obama up by 5.   Polling is not an exact science, so there are very likely errors in these polls.  But Republicans should not fool themselves: this will be a hard-fought campaign over the next few weeks.)

Teachers Unions Becoming More Bipartisan

It looks like some in the teachers unions across the country realize that many Republicans could by sympathetic to a message of local control and conservative skepticism of unaccountable bureaucracies:

While donations to Democrats still far outweigh contributions to Republicans, the proportion of union money going to Republican candidates this year, just over 8 percent, has doubled since the last election cycle, according to the institute. In some states, the increase has been steeper. In Ohio, the proportion of contributions to Republicans jumped to more than 21 percent this year from less than 1 percent in 2010. Similarly, in Illinois, where 16 percent of donations went to Republicans in 2010, the proportion has increased to 22 percent.

“The notion that just because you’re a Democrat” you can take the teachers’ unions for granted has changed, said Jim Reed, director of government relations for the Illinois Education Association.

As teachers grapple with a reform agenda backed by hedge funds and large philanthropic donors and championed by the Obama administration as well as some conservative Republicans, the unions are navigating a delicate political landscape where they increasingly pursue friends in unlikely places.

Team Romney Escalates on the Economy

The Hill reports that the Romney campaign reboot will place a new emphasis on manufacturing and industrial restoration:

That new strategy will involve a renewed focus on China and trade policy — a particularly salient issue as both candidates travel extensively in the manufacturing-oriented state of Ohio this week. Obama has consistently held a small lead in polls of the Buckeye State, and no Republican has ever won the presidency without securing Ohio.

"I think it's clear that the message on China has resonated not only with the voters, but you can tell with the response from the Obama campaign," Gillespie said. "They went up with an ad in response to it on China, and on top of that, the administration filed a case."

Gillespie was referencing a World Trade Organization case filed last week by the Obama administration charging China with unfairly subsidizing automobile parts. Romney had begun airing ads accusing Obama of being too lenient with China a few days before.

I've written before on how a turn to manufacturing could be helpful to the Romney campaign.  The rust-belt is in many ways an untapped political goldmine for Republicans: a message on industrial restoration could not only shore up Romney's standing in Ohio but could also improve the campaign's chances in Michigan and Pennsylvania.  Both states have played a key role on the "Blue Wall" that have given Democrats a floor of 250 electoral votes over the past twenty years.  If Romney can challenge Democrats there, he opens up the map (and his path to the presidency) considerably.

Via NRO: a memo by Romney campaign advisor Ed Gillespie that elaborates on this economic message and a new ad hitting the Obama administration's record on trade.

Building on the Economy

In the American Thinker, I lay out some suggestions about how the economy connects to other issues:

Most voters understandably have concerns about the economy foremost in their minds, but we should not forget that the economy is not just an isolated problem that ails us; in fact, the poor economy is both a symptom of a broader faltering and a factor that affects other parts of our national enterprise.  To wit:

• A weakening economy limits the capacity of the U.S. to project its power across the world.  Economic growth powers military might and softer forms of geopolitical influence, so the lack of this growth weakens the U.S.'s hand in international affairs.
• A poor economy pushes the federal government farther toward fiscal insolvency.  A huge driver of our current deficits is the terrible economic and employment picture.  Moreover, these huge deficits themselves can imperil the economy in the future through weakening the United States' credit and distorting the global market.
• Economic stagnation imperils the dream of upward mobility that has been so central for the American ethos of free-market optimism.
• The hollowing out of the economy leads to fewer opportunities for Americans of diverse talents and abilities.  A proliferation of opportunity is good fertilizer for the cultivation of skills and opportunity, so the shredding of opportunities also closes down many horizons.
• The same psychology that has contributed to the current economic stagnation -- that toxic combination of shortsightedness, incompetence, cronyism, self-dealing, regulatory dysfunction, cocoon-like self-righteousness, and vanity -- does more than imperil our pocketbooks; it also troubles so many other enterprises within our nation.
• An increasingly unstable and dissatisfying economic outlook threatens the middle class, the traditional bulwark of republican government, and many civil liberties.  Further economic decay may undermine the small-government foundations of this nation.

Read the rest here.

Brown v. Warren: The First Debate

Massachusetts Republican Senator Scott Brown and his Democratic opponent, Elizabeth Warren, faced off in their first televised debate of the general election season.

The debate began with an exchange about character, which included Brown bringing up the claim that Warren falsely identified herself as a Native American in order to advance her career.  It then moved on to a discussion of tax policies, with Warren trying to suggest that Brown privileged tax-cuts for the wealthiest over tax-cuts for everyone else---an allegation that Brown strenuously denied.  Later topics included abortion, bipartisanship, energy, and religious freedom.

Brown looked a little uneven at the beginning of this debate, but he picked up steam by the second half.  An easy, relaxed delivery was an asset for Brown in early 2010.  Compared to Warren's rather steady delivery, Brown looked a bit flustered at times in the early part of the debate.

Warren, however, kept returning to the same few themes again and again.  This debate revealed an inversion of the dynamic that prevailed in 2010.  Then, Brown wanted to nationalize the election, reminding voters that he could be the 41st vote to stop some of President Obama's agenda or at least subject this agenda to bipartisan consensus.  Now, Warren is trying to attach Brown to national Republicans, stressing that a Brown victory in Massachusetts could help flip control of the Senate to Republicans.  Massachusetts voters might have been skeptical about giving Obama a blank check in 2010, but many of them appear inclined to vote for him in November.

Still, Brown can use a bipartisan appeal to draw some potential Obama voters away from Warren.  Even many of the Democratic voters in Massachusetts aren't exactly thrilled with the president's record, especially its economic disappointments.  Brown might be able to convince voters that Elizabeth Warren would be just another faithful vote for Obama when the nation really needs more bipartisan debate and openness to new solutions.

Brown might also find it helpful to focus more on trade reform and banking reform.  Mitt Romney has edged in both of these directions, and these issues seem like a territory that Brown could use to change the landscape of the policy debate.

I don't think this debate was a game-changer, but it does remind voters and pundits alike that this race could be close all the way down the wire.

UPDATE: Bill Jacobson agrees that no "knockout blow" was given and rightly notes Brown's many astute appeals to union members.

Growth for Everybody

Jim Antle reminds everyone that conservatives have long supported lowering the tax burden on the working poor and the middle class.

Not So Fast

Scott Brown and Linda McMahon rush to remind voters that they do not think that all poor Americans take no personal responsibility for themselves.

About That Video Tape...

A range of reactions to the Romney tape: Allahpundit, Patterico, Josh Barro, Jonah Goldberg, and Doug Mataconis.  The campaign is already trying to cope with these comments, which probably will cause at least some short-term political pain.

A few other thoughts, which might have less to do with the comments themselves than with the media fallout:

• Conservatism works best when it appeals to a sense of unifying uplift (a sense the Romney campaign has been trying to cultivate of late).
• Republicans should not be afraid to make a case for an economics that can benefit all Americans.
• One can support small government without endorsing the notion of a Manichean struggle between "takers" and "makers."
• Much of the increase in government dependency over the past few years has been due to the poor economy.  Many of those who are dependent upon government do not want to be dependent.  Free-market thinking can inspire a sense of hope tending toward individual empowerment.

 UPDATE: More thoughts from Romney.

Not Sunk Yet

Stories about the Romney campaign's travails---with requisite finger-pointing---are blazing across the web today.

It's crucial to remember, though, that Obama has not put this thing away yet---not by any means.  Throughout September 2004, President Bush led John Kerry by a 6-7-point margin. Kerry ate into that lead with the first debate.  Bush ended up winning by a little over 2 points.

Romney, however, lags behind Obama by only about 3 points, and that margin seems to be shrinking.  A four-point swing, which John Kerry pulled off against an incumbent in a much stronger economy, would be enough to put Romney over the top.

By sending a clear, focused message on the economy and other issues, Romney can decisively shift the momentum away from the Obama campaign.  The presidential debates present a major inflection point.  The electorate is dissatisfied with the status quo, but it also fears it could be worse and is not yet fully sold on the alternative offered by Romney.  If Romney can lay out his own case for restoration and renewal, one that will benefit a broad range of Americans, he can open the door for a November victory.  A Romney victory in November is no sure thing, but neither is an Obama one.

Some interesting points on Obama's use of negative campaigning and the struggles some of his past competitors have run into regarding this use.

Pennsylvania Close?

A new poll from the Philadelphia Inquirer shows Obama leading Romney in Pennsylvania by about 11 points (50-39); a poll by the Inquirer a few weeks ago had Obama's lead at 9.  Still, Obama is not above 50%.

Also, there's still room for Romney to make some gains in Pennsylvania.  He currently lags 11 points behind Obama among independents (36-47), and he only gets 71% of Republican votes.  Hopefully for Romney, more Pennsylvania Republicans will come home as election day nears.  And certainly many independents are open to persuasion.  By reversing the trend among independents, Romney can eat into Obama's lead.

Romney's current attacks on the administration's trade policy may be a way of gaining some ground in Pennsylvania.  Nearly 50% of Pennsylvania voters say that the economy/jobs is the single most important issue.  By highlighting the administration's policy failures while pointing in a new direction, Romney can use these economic concerns to leverage more support.

Pennsylvania can definitely be a state that is in play.  In 2010, it elected Tom Corbett as governor with the biggest margin for a non-incumbent Republican the state had seen in nearly 50 years (since 1962).  It also elected Pat Toomey to the Senate in 2010, and Toomey is considered a pretty strong conservative.  Over the past few years, Pennsylvania has been trending Republican; the right economic case can solidify this trend and bring Mitt Romney closer to the Oval Office.

PRC Controversies

As the Obama campaign parrots lines from the media organs of the People's Republic of China's ruling regime, the Romney campaign continues to assail the Obama administration's record on trade policy with the PRC.

Lanhee Chen, policy director for the campaign, posts the following comments to the campaign's blog:

When China cheats by holding down the value of their currency compared with ours, it makes their products artificially cheap. It's a rigged set-up that drives American manufacturers and American producers out of business, and kills jobs.
Mitt Romney and Paul Ryan will hold China accountable, and ensure they play by the rules. American goods, and the hardworking people who produce them, deserve a fair shake in the global marketplace.

Manufacturing Rising

Katrina Trinko posts the a new ad from Romney attacking Obama for the loss of manufacturing jobs, especially to the People's Republic of China.

A key theme this ad hits upon---and one I've written on a number of times before---is that much of what has happened to US industry over the past few decades is often less a result of the pure "free market" operating and more a consequence of various national governments intervening in the market in order to encourage their industries.  Often, this intervention comes at the expense of the US worker.

Epistemic Closure in the West Wing

Daniel Halper notes an interesting episode in Bob Woodward's new book on the Obama administration.  After serving in the White House (and acting as one of the key policy figures in debates over health-care reform), Peter Orszag turned to write for the New York Times, among other places.  While writing for the Times, Orszag penned a column that said that the president's health-care reform did "many things right" but could have included some medical malpractice reform.

Orszag then ran the column by his colleagues at the White House:

Woodward adds, "Should he alert the White House? [Orszag] wondered. Better not to surprise them. With some discomfort, because a columnist is supposed to speak for himself, not his former employer, Orszag sent his draft to Valerie Jarrett. It was about three days before the column was scheduled to run. Here’s a draft, he wrote in an email to her. Let me know if you have any comments."

Jarrett did have a comment for Orszag, according to Woodward:

"Thanks, Jarrett wrote back. She offered no comments on the draft. The column ran as scheduled, unchanged from the draft Orszag had provided the White House. Orszag was in an airport when he got Jarrett’s email. How could you have done this? It’s ridiculous. You’re so disloyal. You have got to realize the health care bill is wildly unpopular, Orszag replied. Every single speech I give, if I lead with this reflection on its imperfections, the dynamic changes. People will then listen. You can’t hold this law out as perfect. It won’t sell. People think it’s a piece of crap. The weaknesses must be acknowledged. Then it’s credible to say, here’s why it is good and why it is the only thing that will work. Jarrett’s answer was delivered with Politburo finality: You have burned your bridges."

Halper focuses on the fact that the White House was invited to comment on this column before it was released, but what I find even more striking is the substance of Jarrett's reaction.

Orszag is clearly a friend of the administration, he wrote a column that suggests what else could be added to health-care reform in the future and that in no way criticizes what was passed in Obamacare, and Jarrett's reaction is to say that he's "burned [his] bridges."  If an ally's mild advice burns bridges, what doesn't burn them?

And Valerie Jarrett is no second-tier staffer.  She's one of the president's closest advisors.

An episode like this suggests one reason why the administration has found it so hard to change course: a resistance to both internal and external critique can leave an administration digging further and further into a rut, no matter how failed that rut may be.

Pivot to Policy

In preparation for its November match-up against Mitt Romney, you can be sure that, just as it has spent many hours reviewing Ted Kennedy's 1994 playbook against Romney, the Obama campaign has also spent plenty of time going over the 2004 Bush playbook against John Kerry.  John Kerry made a fatal tactical misstep: in casting himself as the blank antithesis of George W. Bush, he gave the Bush campaign plenty of negative space within which it could project its own image of Kerry as an effete flip-flopper.  And that projection worked.  President Bush barely squeaked out a victory (a little over a percentage-point swing would have meant a Kerry victory), but it was a victory nevertheless.

Now the Obama campaign seems to be using a two-pronged (and potentially self-contradictory) attack against Romney: he's either a malicious rich guy who wants to lay you off (Kennedy v. Romney) or a nullity who stands for nothing more than his own ambition (Bush v. Kerry).  Either way, Obama's your man.

The Romney campaign has long premised its eventual victory over Obama on the economic numbers: poor economy, Obama loses.  Operating on this premise, its greatest fear seems to be something like the following.  Since Obama can't win on the economy, the only way he can win is if Romney loses by embracing too many controversial policies or alienating some members of the conservative coalition or by making this election too much about him and not about the incumbent.  This strategy has many merits, but it also risks giving the president plenty of room to project certain policies onto Romney.  If Romney hopes in some ways to be the generic Republican, Obama also seeks to associate Romney with some of the most unpopular policies and effects of recent Republican governance.

And these attacks may be gaining some traction.  Obama's polling over the past month has bobbed in the high 40s, giving him a slight edge over Romney.

Now is certainly not the time to panic in Boston.  The economy still is in rough shape.  Unemployment remains at extended highs in a way unprecedented in the modern political era.  Deficit spending is through the roof.  The president's signature accomplishments are toxic for many in the general public.  Foreign affairs remain troubled.  Many in the center who voted for Obama are now leaning toward Romney or are undecided.

All these things augur well for Romney, and yet fears of the Kerry trap remain.  The recent bounce in Obama's polling has only exacerbated worries on the right that Romney's campaign has lost control of the narrative.  Some of these fears are overblown, but it might be worthwhile to consider how Romney could better feed the beast of the modern media machine.  The media is not going to talk about how bad the employment situation is or how miserable the economy is for the next two months.

In his convention speech and at various stump speeches, Romney has hammered home five key strategies for economic restoration: unlocking America's energy potential, trade reform, improving the skills of the American workforce, moving toward a balanced budget, and small-business-oriented regulatory reform (part of which may involve some tax reform).  Those five ideas represent a germ of policy discussion for the Romney campaign.

So let's build out from that germ to consider what topics the Romney campaign could talk about in order to drive the media narrative away from a focus on gaffes and the horse-race.

• Financial reform:  Romney has already edged in the direction of banking reform beyond just repealing Dodd-Frank.  A burgeoning chorus on the right (at places like AEI, the Weekly Standard, and elsewhere) is embracing banking reform as a key one for economic vitalization, so taking on financial reform could be an opportunity to appeal to both the right and the center.  A policy that rallies your base while also speaking to the middle is political gold.
• Trade:  Romney has made trade reform one of the central tenets of his five-point pitch for economic restoration.  Now is not the time to fear to speak at more length about it.  The middle and working classes have seen what poor and essentially anti-market trade policies have meant for their economic fortunes over the past few years.  Let them know about the alternative: a policy that makes the most of access to foreign markets while also ensuring market-oriented competition.
• Health-care: Romney has already committed to repealing and replacing Obamacare, but recent statements have suggested that certain aspects of Obamacare might also be found in a Romney administration's approach to health-care.  It might be helpful for the campaign to lay out in a clear, focused way certain key policy levers of a Romney health-care reform---dealing with issues such as preexisting conditions, young persons' access to their parents' health-care plan, tax options for health-care and so forth.  The pre-Obamacare health-care system was far from perfect, and many Americans are not anxious to return to that earlier status quo.  By speaking in more detail about health-care, Romney can reassure Americans that he would do his best to improve health-care in the United States.
• Energy:  Energy is a promising topic.  Americans feel the pain at the pump and at the increased cost of goods.  Moreover, the Obama administration has left itself open to attack on this issue.  Let Americans know how a Romney administration would make the most of US natural resources and encourage the creation of a renewed energy infrastructure.  It's more than just drilling for oil in more places: it's supporting a variety of types of energy harvesting (from solar to nuclear to wind and others) that can make US industry more competitive and improve the living standards of Americans.
• The Middle Class:  Romney's campaign has recently been emphasizing the middle class.  Perhaps it might elaborate on why middle class restoration is important for the nation as a whole.  Voters are used to platitudes about the middle class, but, if Romney can explain why this middle class restoration is so important, voters might become more convinced that his plans will actually help the middle class and advance the economy.  Romney would be viewed as offering more than lip-service---he would be laying out a general set of principles.

It's true that, as some Romney advisors have reportedly said, big ideas move the electorate.  But when voters hear both sides pledging to restore economic prosperity, it will be the texture of policy differences that make the difference.  Voters have heard failed promises a plenty from politicians before.  Especially when many voters hold Republicans somewhat responsible for the crisis of 2008, blithe assertions that the next four years will be better than the past decade will not always be immediately believed.

We might note that one of the times Romney ran the strongest against Obama (and the only time he has led Obama in the Real Clear Politics polling average) was in the fall of 2011, the season of the 59-point economic plan.  Romney has the tendencies of the wonk, and the appearance of focused (not amorphous) competence is attractive to the electorate of a nation roiled by crisis after crisis.  When Kerry tried to run as the not-Bush, he lost.  When various Republicans tried to run as the not-Romney, they lost.  Romney likely cannot afford to be merely the not-Obama.  He must represent another way forward.

Eleven Years Later

From President Bush's remarks the day of the attacks eleven years ago:

Tonight I ask for your prayers for all those who grieve, for the children whose worlds have been shattered, for all whose sense of safety and security has been threatened. And I pray they will be comforted by a power greater than any of us spoken through the ages in Psalm 23: "Even though I walk through the valley of the shadow of death, I fear no evil, for You are with me."

Not a Cakewalk Yet

Even as Gallup shows Obama leading Romney 49-44 among registered voters, Jim Hoft reminds us that a September 1980 poll showed Carter leading Reagan by 4 points.  Obviously, Reagan ended up defeating Carter decisively.

But there's no reason for Republicans to get overconfident.  The poll Hoft cites shows Carter garnering only 44% of the vote  (compared to 40% for Reagan), and, throughout most of the Gallup polling season, Carter was polling around 40 or under.  One poll in the summer had Carter down to 29%.  Obama has not polled anywhere near 40%; the Real Clear Politics polling average has him never dipping below 45% over the past year.

Yes, Obama has enjoyed a slight bounce, and, yes, those bounces often fade, and, yes, Obama is very vulnerable.  But Republicans shouldn't lull themselves into expecting an easy blowout, either.

Troubling Jobs Report Again

With only a net gain of 96,000 nonfarm payroll jobs, August looks like another fairly disappointing month for job growth.  Almost nine million jobs were created during Jimmy Carter's term.  At the rate of 96,000 jobs a month, it would take over 90 months to gain the number of jobs that happened in the 48 months of Carter's presidency.  It would take 140 months (or nearly 12 years) for the August job growth rate to catch up with the over 13 million jobs created under Reagan.

Real Accountability

Carol Iaonne actually speaks about personal responsibility for educational reform (and not just "accountability"):

And speaking of students, Rice and other Republicans who speak about education could do a great deal by appealing to the students themselves to study hard, be good, read worthwhile books, not make trouble, and obey the authorities in their schools. This would be far better than sending the message that they have no responsibility whatsoever and if they are failing, it is entirely the fault of their poor teachers and bad schools.   

Statism Rising

A DNC video instructs us that "government is the only thing we all belong to."  I appreciate the notion that every American citizen as an equal claim on the federal government and the value of a single national government uniting the various states of the United States.  But that DNC claim might be more than a little problematic.  I doubt, for example, that the Founders would agree with the notion of the state as the only thing uniting us.

The Shadows of Value-Added

In part due to its embrace of President Obama's Race to the Top, the state of Ohio will be using value-added testing metrics to evaluate how well its teachers are performing.  An interesting detail?  The formula used to calculate teaching effectiveness will be hidden from the public (emphasis added):

Educators have long argued that it would be unfair to judge teachers based on test scores, because students all start the year with varying levels of knowledge. A teacher who has a class full of students who are all two grade levels behind in math could be strongly effective, yet all that teacher's students may still fail state standardized tests.
Value-added tries to rectify that bias by measuring student growth over the school year, not just their final scores. Battelle for Kids, the company contracted by the Ohio Department of Education to develop the state's value-added system, develops a formula that measures average growth for a group, say fourth graders in Ohio. The contents of that formula aren't public.

Romney Speaks

A few quick thoughts on Romney's convention speech.

This was in many respects a data-driven speech.  Some may wish that Romney made a more ideological speech, but this emphasis on practical problem-solving may be a more effective response to the problems we face as a nation.  Invoking ideological platitudes is not necessarily going to persuade the middle---or solve our troubles.

If this speech was not an act of nostalgia, it was an act of reminding.  Romney reminded his listeners of a time of American prosperity, ambition, and opportunity.  By pointing to the past successes of the United States (from the moon-landing to the opportunity provided to his father), Romney was able to summon up some warm feelings about America's past in order to inspire some hope for the present and future.

Romney's "humanization" is a theme the media has picked up and run with.  I think the "humanization" imperative might have been a little overemphasized in media coverage, but this speech did show Romney more emotionally open than in the past.  Romney's devotion to his parents, his wife, and his children radiated off the podium.

Two passages that stood out:

And that’s how it is in America. We look to our communities, our faiths, our families for our joy, our support, in good times and bad. It is both how we live our lives and why we live our lives. The strength and power and goodness of America has always been based on the strength and power and goodness of our communities, our families, our faiths.
That is the bedrock of what makes America, America. In our best days, we can feel the vibrancy of America’s communities, large and small.
It’s when we see that new business opening up downtown. It’s when we go to work in the morning and see everybody else on our block doing the same.
It’s when our son or daughter calls from college to talk about which job offer they should take….and you try not to choke up when you hear that the one they like is not far from home.
It’s that good feeling when you have more time to volunteer to coach your kid’s soccer team, or help out on school trips.

 One of the implicit themes of this speech is the combination of opportunity and empathy.  As this passage suggests, rising opportunity for every American also allows for a strengthening of community.  Expanding economic options allow not simply for some selfish race to accumulate as much wealth as possible but instead provide a chance for individuals to involve themselves in their communities and in charitable enterprises.  To wish for more opportunities for other Americans is to wish to help them; the opportunity to make the most of oneself is one of the greatest aids that can be found.

The other passage:

President Obama promised to begin to slow the rise of the oceans and heal the planet. MY promise...is to help you and your family.

 A number of commentators picked up on this line (and not solely for the topic of "climate change").  It suggests an interesting localism, where Romney pledges to focus on the local problems of local Americans. The past decade of disappointment and decay has led to a sense of dislocation for many Americans.  This emphasis on the local may be a way of trying to assuage this alienation.

GDP Growth for Second Quarter: 1.7%

The Bureau of Economic Analysis has released new numbers for GDP growth in the second quarter of 2012.  The economy increased at an annual rate of 1.7% in the second quarter, which is up from initial estimates of 1.5%.  That's the good news.  The bad news is that GDP growth has slipped from a 2% rate in the first quarter.  In 2011, the second quarter saw a 2.4% growth rate.

According to the BEA, the last time the economy saw two back-to-back quarters with annualized growth rates of 2% or less was in 2009.  Last year, real GDP growth was estimated at 1.8%.  It's very possible that this year could fall below that number.  We could easily be witnessing the economy entering another slowdown.

And this slowdown would be from a mediocre peak.  Annual GDP growth averaged 3.5% between 1947 and 2000.  It last reached 3.5% in 2004.  The lowest annual GDP growth rate under Clinton was 2.5% (in 1995); not one year of the Obama administration has equaled or exceeded that rate.

As the Republicans convene in Tampa, the lingering economic stagnation of the past decade provides a backdrop for their promises of restoration and renewal.

(On the plus side, exports had a stronger-than-expected quarter, growing at a much faster rate than imports.)

Another Poll Shows McMahon Leading in CT

Along with last week's Rasmussen poll showing a Republican lead in Connecticut, a Quinnipiace poll released today shows McMahon leading her Democratic opponent 49-46.  A strong lead with independents helps McMahon:

In today's survey, McMahon's 54 - 42 percent lead among men swamps Murphy's small 50 - 46 percent lead among women. McMahon leads 88 - 10 percent among Republicans and 55 - 40 percent among independent voters, while Murphy takes Democrats 82 - 16 percent. 

Meanwhile, this same poll shows Obama up only 7 points over Romney (52-45).  In 2008, Obama beat McCain by 23 points.

Big Cash for Kennedy

Patrick Howley writes on the fund-raising disparities in MA-04:

Republican Sean Bielat faces off against Democrat Joseph P. Kennedy III in Massachusetts’ 4th Congressional District in November. Kennedy has received an extraordinary amount of out-of-state fundraising and favorable coverage from liberal mainstream media outlets more focused on his last name than his district.
Kennedy, 31, held a fundraiser last Thursday at his family’s Hyannis Port compound. The event was co-hosted by his grandmother Ethel and the Democratic Congressional Campaign Committee (DCCC). House Minority Leader Nancy Pelosi and Massachusetts Democratic congressmen Barney Frank, Bill Keating, Ed Markey, Richard Neal, John Tierney, and Niki Tsongas were in attendance. A ticket for four to the event, with access to a photo line, cost $35,800.
The Hyannis Port fundraiser was no outlier.
“His fundraising is just ridiculous, both in quantity and by virtue of the fact that he’s started a leadership PAC. How many first-time candidates start leadership PACs because they’re raising so much money?” Bielat, a former Marine Corps officer and Barney Frank’s Republican challenger in the district in 2010, told the Free Beacon.
“If you look at his FEC report, you have to go 5 or 6 pages before you find a donation below $1,000,” said Massachusetts political consultant Brad Marston. “It’s all these family connections that have been set up over six decades.”

 According to Open Secrets, Kennedy has received just $455 in small donations (donations under $200), which Open Secrets rounds to 0% of his $3-million fundraising haul.  Bielat, on the other hand, has raised $214,000 in small contributions (out of about half a million in contributions).  So Bielat has raised about 4700% the amount of small donations that Kennedy has.

Close in Michigan

Two interesting polls from Mitchell Research in Michigan: Romney tied with Obama at 47% each, and GOP Senate nominee Pete Hoekstra leading Democratic incumbent Senator Debbie Stabenow 45-44.  Gaining ground in the Rust Belt would be an important step for Republicans forging a national coalition in November.

Scuffle in Massachusetts

An Elizabeth Warren campaign worker goes after the video camera of a Republican tracker.  Bill Jacobson reminds us that this is not the first time a worker for one of Scott Brown's Democratic rivals has gotten physical with critics.

Independence and Union

Matthew Continetti has a very interesting essay up in The Weekly Standard arguing for a Republican campaign banner that unites the classic American terms of independence and union.

Continetti offers a more capacious view of "independence":

The American Revolution was fought not only to achieve independence from the British Empire, but also to realize independence for self-governing citizens. But America and Americans have become increasingly dependent in recent years. We are dependent on the government for jobs, for benefits, for pensions, and for health care. We are dependent on overseas energy and on cheap goods from China. We are dependent on consumer debt issued by a consolidated financial system in which the largest, Too Big to Fail institutions and their agents rig the game in their favor (see Rubin, Robert). Our economy seems dependent on an erratic and unaccountable Federal Reserve.

Such dependencies threaten to spiral out of control. Budget deficits and public debt are financed by overseas powers whose interests are not our own. Health expenditures in particular threaten to crowd out other parts of the budget, such as the core government function of national defense, as well as the education, transportation, and research dollars the incumbent talks so much about. Increasing reliance on means-tested government transfers enervates the character of the people and hampers economic growth. Trade deficits send money to potential adversaries, who return the money in the form of asset bubbles. The dangers of big banks are obvious: Excessive leverage and madcap derivative trading not only increase systemic risk, but the political pull of mega-firms also promotes cronyism and inside dealing.

Some of Continetti's solutions are also interesting:

The health care system would be improved and costs lowered through competition, the freedom to purchase insurance across state lines, a tough approach to malpractice litigation, and an end to the tax penalty for individuals who do not obtain insurance through their employer. The emphasis of social policy would be on getting families off government assistance, not ensnaring more of them in a safety net that raises effective marginal tax rates.

Full exploitation of America’s domestic carbon energy resources​—​oil, coal, and natural gas​—​would lessen our dependence on foreign oil and reduce the trade deficit. The sort of retaliatory tariffs against unfair Chinese trade practices and currency manipulation for which Irwin M. -Stelzer has argued in these pages would have a similar effect. A center-right consensus has emerged to deal with Wall Street: Link bank size to increased capital requirements so that financial institutions cannot grow fat on leveraged dollars. Go ahead and audit the Fed, but also increase the pressure on it to commit to a rules-based monetary policy rather than the sort of haphazard discretionary approach it has adopted since the financial crisis began.

A point implicit in Continetti's argument is that independence and union are allies in the American system.  Our union is strengthened by being populated by prudent, independent individuals.

The Middle Class: Fuel of Economic Growth

Henry Blodget connects the decline of the middle class to sputtering economic growth over the past decade:

Over the past 30 years, a larger and larger portion of America's income growth has gone to those in the top 10% of incomes, and especially those in the top 1%. This is a major change from the prior 60 years, in which the top 10% and the bottom 90% shared in the income gains.
A stark and startling example of this trend is the fact that, adjusted for inflation, "average hourly earnings" in this country have not increased in 50 years....

The reason the decline of the middle class is important is not just about fairness. It's about the health of the economy as a whole.
Collectively, the middle class represents enormous buying and spending power, and in the past 60 years this spending power has helped the U.S. economy become the envy of the world.
But now, however, the middle class is increasingly strapped. And the resulting impact on spending is constraining the growth of companies that sell products and services to American consumers.
The causes of this middle-class decline are many, from globalization (jobs being shipped overseas), to the decline of private-sector unions, to the wholesale embrace of a "shareholder value" religion that values profit over everything else that companies produce. But the result of the trend can be seen vividly in two charts.
First, wages are now at an all-time low as a percent of the economy.
Second, corporate profits are now at an all-time high.
To truly "fix" the U.S. economy, corporations are going to have to be persuaded to invest more of their excess profits in their employees, both by hiring new employees and paying existing employees more. "Wages" to employees become spending money for those employees, and the spending produces revenue for other companies. If corporations can collectively be persuaded to reinvest more of their profits in their people, in other words, they will help restore their own revenue growth.

Romney: Innovation and Trade Reform Will be Key

In a Wall Street Journal op-ed, Mitt Romney reflects on what his experiences at Bain taught him.  Here's a passage particularly relating to manufacturing:

In the 1990s, when the "old-technology" steel industry in the U.S. was failing, Bain Capital helped build a new steel company, Steel Dynamics, which has grown into one of the largest steel producers in America today, holding its own against Chinese producers. The key to its success? State-of-the-art new technology.
Here are two lessons from the Steel Dynamics story: First, innovation is essential to the competitiveness of U.S. manufacturing. We are the most innovative, entrepreneurial nation in the world. To maintain that lead, we must give people the skills to succeed. My plan for a stronger middle class includes policies to give every family access to great schools and quality teachers, to improve access to higher education, and to attract and retain the best talent from around the world.
The second lesson is that we must have a level playing field in international trade. As president, I will challenge unfair trade practices that are harming American workers.

Romney's discussion of the second lesson is fairly short, but, throughout much of the primary, he discussed the importance of restoring US manufacturing in the face of competition that was anything other than free and fair trade.  Perhaps he will continue to develop this theme in the months ahead.

Romney Edges Toward Banking Reform

James Pethokoukis, Erick Erickson, and others have pondered the electoral and policy benefits of Mitt Romney's campaign taking up banking reform.  Well, now it seems as though Romney is ready to address this issue, if this interview with Time is any evidence (emphasis added):

STENGEL: Another sort of related business question, if you look at the regulatory environment for the banks now and there are basically five big banks that in terms of assets disproportionately outweigh everybody else, is there a situation of moral hazard now related to those banks? And what would you do to reform the financial sector? Would you bring something back like Glass-Steagall? How do you see it, Governor?
ROMNEY: I think Dodd-Frank has contributed to a concentration of banking assets into the hands of a small number of banks. By designating certain banks as being too big to fail, strategically important banks, it makes it more difficult for the banks not so designated to attract customers and to expand their business. What you’ve seen as a result is a concentration in the hands of a handful of banks that now has greater systemic threat that what even existed before.
The right course was not to say that this handful of banks will be protected by the government, implying therefore that all the rest of the banks are on their own, because smart depositors will all move towards the banks that are protected by government. It had the opposite effect of what was advertised. What was advertised was that we would keep the too big to fail banks from getting bigger, but the result of the legislation is just the opposite.
What we need to do is to make it easier for the community and local banks and regional banks to succeed and thrive because they, after all, are the places where small and medium-size businesses get their funding. So the whole idea of designating a handful of banks as the government-protected too big to fail banks is the wrong course.
Now, we do need to have regulation in the banking industry. Extensive regulation is appropriate in an industry that has such an impact on the overall economy. We have to look at what the causes were of the last crisis and take action to prevent those causes from reappearing. What kinds of things come to mind include capital requirements, levels of leverage which are appropriate and inappropriate, banks maintaining risk in assets which they gather. Specifically, I’m referring to the idea if a bank originates a loan or a mortgage that it should be on the hook for some portion of the loss if that loan or mortgage fails. These kinds of provisions, I think, would be directly applicable to the kind of crisis that we experienced before.

Interestingly in these comments, Romney emphasizes the critique put forward by the Dallas Fed, and echoed by many on the right and center (and some on the left), that Dodd-Frank made Too-Big-to-Fail worse---not better.

Taking on banking reform could be helpful for Romney for at least two reasons: it could sketch out regulatory foundations to help prevent a financial collapse in the future, and it would also shift the territory of the campaign.  By embracing banking reform, Romney could disrupt the leftist narrative that he and other Republicans are merely tools of financier-plutocrats.  Americans still are hurting from the financial crisis, and and many still have a lingering fear that the causes of this collapse have not been fully addressed.  Financial reform could give Romney a way of assuaging to the fears of many Americans, particularly those in the economic middle and those suspicious of both parties.

There's a conservative case to be made for financial reform, and Romney may be heading in the direction of making it.

Republican Revival in New England?

Two polls that might inspire optimism in New England Republicans:

• Massachusetts Senate: Scott Brown up 5 on Elizabeth Warren, 49-44.
• Connecticut Senate: Linda McMahon up 3 on Chris Murphy, 49-46.

Pew on the Middle Class

Pew has a helpful study up about the evolution of the middle class over the past ten years, documenting some of the ways in which it has lost ground.  Perhaps most striking is the following finding: in 1971, middle income households had 61% of the national income, but, by 2010, these households had only 45% of the national income.  Upper income households went from having 29% of the national income in 1971 to 46% of the national income in 2010.  Interestingly, most of this change in income share seems to have taken place between 1980 and 2000.  2000 also serves as the tipping point after which economic growth slowed down for most sectors of Americans.

The connection between declining fortunes of the middle and the economic slowdown is a point that could be further explored by conservatives.

Not Backing Down

Todd Akin seems to be making a play to stay in the Missouri Senate race in a just-released spot begging the people of Missouri for forgiveness:

“Rape is an evil act. I used the wrong words in the wrong way and for that I apologize. As the father of two daughters, I want tough justice for predators. I have a compassionate heart for the victims of sexual assault. I pray for them,” Akin says. “The fact is, rape can lead to pregnancy. The truth is, rape has many victims.”

 PPP has released a poll purporting to show that, while these comments have helped cause Akin's approval rating to crater, he still runs about one point ahead of McCaskill, 44-43 (which is basically the result PPP got when it polled in May).

However, as Jim Geraghty and others have noted, the PPP poll sampling swings heavily Republican.  In May, the D/R/I breakdown was 35/33/33.  For the August poll, it was 30/39/32.  So it went from slightly favoring Democrats to hugely favoring Republicans.  As Ed Morrissey reminds us, even in the Republican "wave" year of 2010, Republicans only had a three-point advantage over Democrats, so a 9-point advantage seems rather interesting, to say the least.  In contrast, SurveyUSA polled this race and used an even split between Republicans and Democrats.

I had been doing some calculations about what the results would be under a more usual partisan distribution, but CAC at Ace of Spades has beaten me to the punch, so I'll just link and quote:

Here are the real numbers:
If turnout in November matches 2008 (it won't):
McCaskill 49.25% Akin 39% (this is a D+6 turnout model)
If turnout in November is even, an incredible feat for the GOP considering heavy turnout in St Louis and Kansas City during an election year:
McCaskill 47% Akin 40%.
If turnout in November matches the best we have ever seen in the state (R+3 during 2010):
McCaskill 45% Akin 41%.

Akin Achin'

Todd Akin's comments about "legitimate rape" have ignited a media furor, particularly among the right.  Ann Coulter has demanded that he withdraw from the Senate race against incumbent Democrat Claire McCaskill.  Romney's campaign has also denounced Akin's remarks.  GOP groups are fleeing the state to protest Akin's campaign.

So will Akin drop out?  There are conflicting reports here.  This story is still developing quickly.

Education Left Behind

A new report has come out on employment by educational level.  A lot of interesting data.  Some of the key points:

• New jobs were created for the holders of college degrees during the technical recession, and these jobs have increased over the "recovery."
• About the same number of jobs exist for those with some college but without a four-year degree.
• Nearly 6 million jobs for those with a high school education or less have been lost since 2007; some of those losses occurred during the "recovery."
• The unemployment rate for new high school graduates is 24%.
• Earnings of those with a BA were nearly twice those of high school graduates.

See Kay Steiger for an interesting chart from this report.

It looks like in the Obama economy, many have still been left behind---especially those without a college degree.

No Prosecutions at MF Global

Jon Corzine's collapsed firm, MF Global, looks like it will escape any prosecutions for the actions leading up to its collapse:

A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives.
After 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.
The hurdles to building a criminal case were always high with MF Global, which filed for bankruptcy in October after a huge bet on European debt unnerved the market. But a lack of charges in the largest Wall Street blowup since 2008 is likely to fuel frustration with the government’s struggle to charge financial executives. Just a few individuals — none of them top Wall Street players — have been prosecuted for the risky acts that led to recent failures and billions of dollars in losses.

There's No Business...

Dan Riehl has a good point here:

I'm not unrealistic. But if attacks are going to come and they are and will continue, the GOP has to have answers. It can't all be show business.

There's a difference between getting ratings and winning an election, and there's a difference between winning an election and actually governing.  Barack Obama had a very successful campaign; his presidency has been another story.  At some point, policy matters.

The Real Mediscare Trap

The Paul Ryan pick as Republican vice-presidential nominee may offer numerous opportunities for Mitt Romney's campaign, but it also offers both an electoral and an economic trap: the risk of transforming this election into solely a referendum on various Medicare reforms.  Some in the conservative movement may be hungry for a "choice" election on the future of government-financed medical spending, but this eagerness should not distract from needed economic reforms.  Meanwhile, there is a risk that the election becomes mired in a cycle of Democratic assaults upon the Ryan budget and Republican outrage at these assaults.  Such a dynamic might be good for blogger traffic, but it would likely damage the political prospects of Republicans and the economic prospects of Americans.

Medicare may be on an unsustainable path, and the growth rate of medical expenditures may eventually break the finances of the federal government.  Debates about how to reform the federal financing of medical care are necessary and worth having, yet what is at issue is when we should have these debates and how much we should focus on such debates at the present moment. Barack Obama would very much like to fight over Medicare proposals; he would like to avoid any attention to his record over the past few years.  The president would vastly prefer to distract from the failures of the present through conjuring fears about the future.  There is no reason for Republicans to let him slide on his record.  By allowing Obama to make Medicare reforms the centerpiece of this election, Republicans would be giving him a clean slate.

By sacrificing all other issues for an exclusive focus on Medicare and other entitlement reforms, Republicans would also be making a policy mistake.  However much it may loom in the future, Medicare is not what imperils the economy right now.  Businesses are not hiring not because Medicare might go insolvent a number of years down the road.  If the economic trajectory of the past four years continues indefinitely into the future, almost no version of Medicare (including Paul Ryan's) will be affordable.  If the point is to reform Medicare to make it sustainable (as Ryan allies claim), then we had best look at more pressing issues for the sustainability of Medicare and the future of the American economy as one of dynamic growth.  Moreover, even Ryan's reforms, which many in the Beltway conservative establishment have rallied around, would do nothing to change entitlements for the next ten years at least.  Ten years is a long time, and there need to be conservative alternatives for the medium term as well as the long term.

So Romney and his fellow Republicans should not let the focus slip too much from the theme of economic restoration and renewal.  And I for one am doubtful that reducing the deficit or cutting spending alone will solve our economic problems.  Many other structural risks are posed to the American economy.  For instance, banking reform could be a key policy and political move for Romney.  We still live in an era of too-big-to-fail.  Many on the right have become increasingly aware of how TBTF endangers both economic growth and the freedom of the American economy.  It seems very likely that the president's signature financial reform initiative, Dodd-Frank, has made it worse.  Finance will need to be made a market again (rather than a government-backed syndicate) in order for the economy to take off.

Our immigration system and lack of immigration enforcement still place burdens upon the middle class---both native-born Americans and legal immigrants.  Our trade policies often incentivize the intervention of foreign governments into the American economy, mocking rather than living up to the spirit of free trade and free enterprise.  Our regulatory structures too often encourage deindustrialization and rent-seeking.  Our tax policies are larded through with loopholes for interests connected to those in power.  Debt and stagnating incomes have led to a troubled housing sector.  A lack of a smart energy policy drains our growth.  Disappointment and diminishing resources have been the story for too many Americans.  Inner-city families still struggle with urban blight and decay.  Our health-care system is in need of market reforms.

A host of challenges face our economy and our society---and not all these challenges can be met through the budget.  Entitlement reform, if it is to be advanced, may work best as part of a broader menu of needed reforms.  Denouncing the president's Mediscare tactics may rally the base, but it will not persuade the middle and it will not alone put the economy back on the path to prosperity.  One of the key traits of conservatism is facing immediate crises first.  Well, the breakdown of the economy is the immediate crisis.  Restoring economic vitality will go a long way toward advancing the causes of free markets and free people that Romney and Ryan have publicly defended.

There is a bigger choice ahead than what will happen to Medicare: it is whether the United States will take a dark road of decline, despair, and decay, or whether it will return to what is best within itself and instead take the initially more difficult but ultimately more rewarding path of renewal, national recovery, and civic restoration.

Pick-Up Opportunity in Missouri

Claire McCaskill barely beat Jim Talent in 2006 to become a US Senator for Missouri.  According to a new SurveyUSA poll, she trails her Republican challenger, Todd Akin, by 11 points: 40-51.  This could be a real pick-up opportunity for Republicans in Missouri.

Whose Cuts?

Avik Roy, a policy advisor for Romney, highlights a key difference between Romney's budget and the House-backed Ryan budget: the Ryan budget keeps Obamacare cuts to Medicare (though it would not use those cuts to fund Obamacare), while Romney would repeal the Medicare cuts as well:

And the Romney campaign has explicitly stated that it will not preserve Obamacare’s cuts to Medicare. “Mitt Romney and Paul Ryan have always been fully committed to repealing Obamacare, ending President Obama’s $716 billion raid on Medicare, and tackling the serious fiscal challenges our country faces,” said Romney policy director Lanhee Chen in a Monday statement. “A Romney-Ryan Administration will restore the funding to Medicare, ensure that no changes are made to the program for those 55 or older, and implement the reforms that they have proposed to strengthen it for future generations.”

It looks like the Romney campaign is going to start hammering Obama on the Medicare cuts used to fund Obamacare.

Whose Budget?

A Romney memo suggests that the campaign will not sign on totally to all the details of the 2012 House budget:

1)    Does this mean Mitt Romney is adopting the Paul Ryan plan?

• Gov. Romney applauds Paul Ryan for going in the right direction with his budget, and as president he will be putting together his own plan for cutting the deficit and putting the budget on a path to balance.

• Romney’s administration will go through the budget line by line and ask two questions: Can we afford it? And, if not, should we borrow money from China to pay for it?

• Mitt Romney will start with the easiest cut of all: Obamacare, a trillion-dollar entitlement we don’t want and can’t afford.

• Mitt Romney also laid out commonsense reforms that will make good on our promises to today’s seniors and save Social Security and Medicare for future generations.

Reform Details

Yuval Levin offers a sympathetic exposition of the Wyden-Ryan Medicare reform proposal.

What Might Romney Hope to Gain by a Ryan Pick?

So Paul Ryan will be the vice-presidential nominee for the Republican party in 2012.  What could be some of the advantages of a Ryan pick?

• Ryan cements the loyalty of the "conservative" establishment.  Much of this establishment, in the Weekly Standard and the Wall Street Journal and various think tanks, have been skeptical of Romney but devoted fans of Ryan.  Now, this establishment can become top cheerleaders for the Romney campaign.
• Ryan has been able to win in swing districts before.  Ryan's district, WI-01, is a paradigmatic swing district, bouncing between George W. Bush in 2004 and Barack Obama in 2008.  In both 2004 and 2008 (and many other years), Ryan was able to win with big margins.  Perhaps Romney is hoping that will translate in the general.
• Ryan is a fierce debater.  Quick on his verbal feet, Ryan seems to relish to chance to spar with top-line Democratic principals.  The vice-presidential debate in the fall could be a chance for Ryan to shine.
• It changes the narrative.  The Obama campaign has tried to make this election about Romney's prior business experience and persona as businessman.  The Ryan pick could put a roadblock in front of this strategy.  With various signature policy proposals, Ryan might help change the campaign narrative to be about policy rather than personality.