Our House Burned Down, So Let's Worry About Our Electric Bill

Pundits love framing discussion about the deficit in the same terms as household budgets. And while I don't find that framing very useful and at times purposefully obtuse, here's my stab at it.

About four-and-a-half years ago your family's house was on fire. Your neighborhood fire department took the necessary steps to contain and eventually put out the fire. But your house suffered severe damages that were in need of repair. So you borrowed some money to make minimal repairs and got the house back to the point that you could sort of live in it again.

But it still needs a lot of work, including repairing a leaky roof. You have some debt, but it's manageable debt. In fact, the bank at the corner is still willing to lend you a lot of money and will do so at practically 0% interest because you are such a sure bet to repay it. So would you borrow some more money to finish fixing up the house now?  Or...would you spend 2-3 years singularly focused on reducing your electric bill and food expenses, and cutting junior's weekend art and music expenses, in hopes of slightly improving your debt holdings over the next 20 years?

And you'd be doing this because you are worried about how much debt you will have 15-20 years from now, even though the biggest driver of your debt happens to be your mortgage and education costs - neither of which are addressed in any of your household budget plans.

That in a nutshell is what has happened with the financial crisis/Great Recession and the ensuing fiscal debate that has been taking place in Washington the past 3 years. Our house was on fire (financial meltdown, over-leveraged household debt) and the fire is out and we still have a lot of work to do (economic growth, high unemployment). But we're focusing on debt instead and ignoring the biggest drivers of debt (health care costs, particularly Medicare).

This week both Paul Ryan and Senate Democrats both plan to release balanced budget plans, as if balancing the budget is an end unto itself. If balancing the budget in 10-20 years would lead to huge economic growth and job creation, it'd make more sense. But almost every economist predicts that any attempt at drastic spending reductions now would hurt economic growth and probably send us back into recession.

Here was Ben Bernanke a few weeks ago explaining Economics 101 to everyone else in Washington:

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An Early Romney Campaign Autopsy

Conservatives and Romney campaign insiders are fudging the truth about why Romney is losing

Politico published the kind of piece that every campaign dreads before an election: a finger-pointing, off-the-record pre-postmortem filled with criticisms by staff and advisers about why a candidate is losing.

This particular story seems to shift most of the blame to Mitt Romney's top strategist, Stuart Stevens, and the rest to Romney himself. My take is that neither Romney nor his top strategist are totally to blame, although obviously both share in it. I agree with the general sentiment that Romney is just not a great candidate. But as Ezra Klein and others have noted, the false narrative in the media, that due to the poor economy it was really Romney's race to lose, overinflated expectations from the beginning. I recall many delusional Republicans last year proclaiming that any candidate with a pulse would beat Obama so they wanted to nominate the most conservative candidate possible. The bottom line is that no matter what the unemployment rate is, as long as the rate is roughly the same or decreasing leading up to the election and the economy is growing every quarter, the incumbent is the favorite to win, not the challenger.

In short, before 2009 Romney seemed like a reasonable competent technocrat. And now he is forced to lead a party at exactly the wrong time for someone with his resume. The id of the party the last few years has been Donald Trump (Birthers), Sarah Palin (anti-elites), Ron Paul (Libertarians), and the Tea Party wings. Only these people or someone from these groups would have excited the base of the party. But the elite establishment in the party understood that any candidate associated with those groups would have no chance of winning over swing voters in the general election. And Romney was the most electable alternative.

However, Romney was handcuffed coming into this race, as any recent Republican governor of a blue or purple state would have been. The party has moved so far to the right in just the last 4 years that any Republican governor who actually had to make moderate compromises to, you know, govern was going to have a really difficult time talking about his accomplishments without depressing the enthusiasm of the base. What were mainstream conservative positions just a few years ago are now poison because Obama and the Democrats supported them. Remember this is the party that is suddenly too conservative for "lefties" like Robert Bennett and Richard Lugar.

The base was always more energized about beating Obama than about voting for Romney or any of the candidates who were running in the primary. So add in some bigotry toward Romney's Mormonism and his inconsistent positions on social issues, and it was obvious a segment of the base was going to be ambivalent towards him. And many of the swing "white working class" voters, in the Rust Belt in particular, were never going to warm to him because of his record at Bain Capital. So in the middle of September Romney is still trying to shore up and energize the base, unable to move far enough to the center for fear of losing the base.

I'm sympathetic to Romney's plight in this campaign. Don't get me wrong - I view him as a complete phony and I've disliked the blatant dishonesty that has been at the core of Romney's arguments. But gaffes aside, given where the Republican party is now, the demands on the candidate to hew to the party line on everything, Romney's own personal appeal problems, and the limits placed on what parts of Romney's bio he allowed his campaign to trumpet, all in all I think the campaign has done about as well as you could have hoped.

Conservatives dumping on the Romney campaign are doing so to explain why Romney is losing in a way that validates their worldview. The reality is that Republican agenda is not all that popular with the public. The party brand is still damaged from the Bush presidency and generally polls confirm that voters prefer the specifics of the Democrats' plans to the Republicans' plans on nearly every issue of importance. You wouldn't know that if you got your news from the Right-wing media bubble, but with the exception of the "deficit", voters give Obama/Democrats more trust and support on every single issue that matters. Obama is even beating Romney on the economy at the moment.

Romney himself may not be trusted as a true conservative by the base, but make no mistake - his campaign and his economic plan are the most conservative in years. Romney has been forced to take a very hard line on social issues. And his economic plan is the most conservative in decades. As noted during the DNC, Romney's campaign is ultimately Bush's economic plan, Cheney's foreign policy, and Santorum's views on social issues. It's a combination of all of the unpopular things the Republican party has advocated over the last decade with a flip-flopping Gordon Gekko as the chief messenger. And people are surprised he's trailing?

The Fox, Limbaugh, Hannity, etc., nexus will inevitably spin a Romney loss as a result of him not being conservative enough or not communicating the specifics of those swell conservative plans well enough. They haven't come to grips with the possibility that their ideas just aren't that popular right now. Romney has acquiesced to every demand of the far right and even put golden boy Paul Ryan on the ticket, yet somehow he's not being conservative enough to much of the base?

This was an election that was always going to be much more difficult for Republicans to win than they had anticipated. And the selection of Romney as the candidate made it nearly impossible to run a coherent campaign that could also appeal to swing voters. It is not the fault of the campaign, it's the fault of this particular candidate and the cynicism of the party that made it so difficult for the candidate to be himself. After four years of obstruction and incoherence on policy, Mitt Romney is without a doubt the candidate the party deserves. He might even be the candidate they need too if it results in a decisive Electoral College loss as well as the loss of the House majority.

Paul Ryan is a Fraud

 I can't tell them we really plan to end Medicare as we know it. I'm running for President for pete's sake. (CNN)

It'll be interesting to see how the Mitt Romney/Paul Ryan ticket handles criticism of their budget plans in the upcoming days. The next week or so will likely frame how both campaigns talk about his issue from now until November, barring a potential reboot during the conventions.

At least when it comes to specifics, both are already distancing themselves from the budget blueprint laid out by Ryan nearly two years ago, which Romney had previously voiced support for up until about 96 hours ago. Romney even went so far as to say he'd sign Ryan's budget into law within the first 100 days of his administration.

Previously we've heard how "courageous" Ryan is to put forth such a budget that compels us to have a "serious conversation" about changing Medicare from a contribution program to a voucher program and potentially changing other entitlements. The beltway media love to have serious conversations about having serious conservations about cutting entitlements, as long as their sizable beltway media incomes aren't taxed at a higher rate.

But now that his plan is receiving more scrutiny outside the beltway and outside the base of his party, so far Ryan is backtracking awfully fast and Romney is claiming Ryan will fall in line and disavow his plan, even though it's the same plan Romney said he would sign if he were President.

That would seem to be the opposite of "courageous." It isn't all that courageous to propose a budget plan that carries out a 40+ year goal of the movement conservatives in your party, which includes upper income tax cuts and entitlement and spending cuts that transform the budget in a way that most  Americans do not support.

In 2003-04, a young rising star in the Democratic Party named Barack Obama received some coverage for his "courageous" stance against the Iraq War. Much like Ryan's budget plan, his position was very popular among the base of his party, but less popular with independents and the other party. And then imagine a world where during the 2008 campaign, Obama attempted to run away from that position, or at least perhaps tried to muddy the waters to try to conceal what his original position was, when it turned out 2/3 of the country held the opposite opinion. There would be a lot of terms to use to describe Obama's new messaging - politically savvy, hackish, etc, but "courageous" would not be a term anyone would use. Yet with Ryan, he's still portrayed that way by most of the balance-obsessed media.

Here's the thing, either Ryan's plan does what it says it does or it doesn't. If it does, then all the attacks the Obama campaign is going to make on it are mostly accurate. If it doesn't, then the plan was a fraud to begin with and Ryan should have no credibility on these issues. Or as Paul Krugman, Jonathan Chait, and others suggest - perhaps the plan is honest about the massive cuts, while being fraudulent when it comes to revenue estimates and deficit reduction. And the clarity isn't helped when Romney keeps signaling that the Ryan plan is great, but also is different from his plan in many, many secret ways that he'll be glad to tell us all about after we elect him President.

In any case the Republicans have a huge problem right now. At least one of the following three things must be true: 1)their Presidential ticket plans to end Medicare as we know it, while cutting taxes for upper incomes, 2)their budget plan couldn't possibly work, not should it be taken seriously, and/or 3)the result of their plan will severely increase the deficit, painting their 3+ year campaign in favor of deep spending cuts to reduce the deficit as nothing more than a charade to co-opt the Tea Party and re-take power.

So which is it?